<PAGE> 1
ANCHOR
SERIES
TRUST
ANNUAL
REPORT
DECEMBER 31, 1998
<PAGE> 2
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DEAR ANCHOR SERIES TRUST INVESTOR:
We are pleased to present our annual report for the Anchor
Series Trust, the underlying trust for the ICAP II Variable
Annuity from Anchor National Life Insurance Company and First
SunAmerica Life Insurance Company. The following information
from Wellington Management Company, LLP, the Subadviser for the
Anchor Series Trust Portfolios, should give you some insight
into the markets over the past twelve months and how conditions
affected the performance of your underlying investments.
The following information from Wellington Management Company,
LLP, the Subadviser for the Anchor Series Trust Portfolios,
should give you some insight into the markets over the past
twelve months and how conditions affected the performance of
your underlying investments.
ECONOMIC OVERVIEW
1998 was a positive but variable year in most of the world's
major investment markets. Returns by asset class, industry,
market cap and country varied a great deal from quarter to
quarter, as well as varying between market segments. From an
asset class perspective, U.S. large cap stocks ended the year
strongly with the S&P 500 Index up 28.6%. U.S. bonds were up
8.7% as measured by the Lehman Brothers Aggregate Index, while
non-U.S. bonds (unhedged) were up 17.8% as measured by the
Salomon Brother's Non-U.S. World Government Bond Index,
unhedged. International equities also performed well and were up
14.5% as measured by the MSCI All Country World Free (ex-U.S.)
Index.
A YEAR OF GLOBAL DRAMA
The strong year-end returns masked the dramatic economic and
market conditions during 1998, which can best be described as
extremely challenging. The developed countries of the world,
with the exception of Japan, demonstrated strong growth in the
first half. However, growth decelerated in the second half of
the year. Japan and many emerging countries, especially in Asia,
experienced contractions in economic output. The primary reasons
for the contractions in Asia came from the continued fallout
from 1997's financial and economic crises and currency
devaluations. Another factor was the general economic malaise in
Japan which is experiencing its deepest recession since World
War II. The downwards pressure on global prices from the Asian
crisis allowed interest rates to fall in Europe and the U.S.,
resulting in strong rallies through mid-year. By late summer,
however, investors experienced a sharp change of heart and began
to worry about the world economy. As news was released of the
Russian default and the bailout of a prominent New York hedge
fund, markets worldwide went into a sharp decline. However, the
markets' sell-off reversed starting in October. Central banks
lowered interest rates substantially in a coordinated global
effort led by the U.S. Federal Reserve to head off a global
credit crunch, which in turn boosted market returns. Almost all
markets, with the notable exception of Japan, finished the year
strongly as investors looked toward 1999 and beyond with renewed
enthusiasm.
Within the U.S. equity market, large cap stocks outperformed
small cap stocks by a very large measure. For example, the top
50 stocks in the S&P 500 Index, which are often referred to as
"Mega-Cap" stocks, returned 39.5%, outperforming the smallest
100 stocks in the S&P 500 by nearly 40%. The Russell 2000 Index
returned -2.6% -- a stunning 42% below these top 50 "Mega-Cap"
stocks. Relative to equity management style, growth-style
outperformed value-style investments by 27.5% for the year. Not
surprisingly, given the excitement over the Internet,
Information Technology (+76.4%) and Telephone (+50.6%) led the
advance by industry sector. Communications Equipment, Retail and
Drug stocks all performed well in 1998. On the flip side,
Energy, commodity related, and industrial related
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1
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investments faired poorly. These areas were impacted by slowing
global growth and the extremely low inflation that exists in
many parts of the world, as well as outright deflation which
prevails in China, Hong Kong, Singapore, Japan and Sweden.
Within this environment, the eleven Anchor Series Trust
Portfolios provided investors with the following returns in
1998.
20+% ABSOLUTE RETURNS AND RELATIVE OUTPERFORMANCE
The Growth and Income, Growth, Multi-Asset and Capital
Appreciation Portfolios each exceeded a 20% return for the year
and surpassed the average return for their respective Lipper
variable annuity category of similar funds. The Growth and
Income Portfolio provided investors with a 30.2% return
(measured at the underlying Fund level), surpassing the S&P 500
Index's return of 28.6%, and beating the Lipper Growth and
Income average (16.4% return in 1998) by some 13.8%. The Growth
and Income Portfolio focuses on the largest cap stable-growth
stocks. This strategy was highly beneficial, placing this fund
in the top quartile within the Lipper competitive group.
Likewise, the Growth Portfolio slightly outperformed the broad
market index by providing investors with a 29.0% return. The
small portion of the Growth Portfolio which is dedicated to
smaller market cap stocks was a slight negative compared to
large cap stocks in 1998, but this shortfall was more than
offset by strong stock selection. The Growth Portfolio provided
investors with a 4.10% premium over the Lipper Growth category,
which returned 24.9%, ranking the Growth Portfolio well above
average. With only approximately 60% invested in stocks, the
Multi-Asset Portfolio's return of 24.5% nearly equaled the
Lipper Growth average (which is all stocks). The Multi-Asset
Portfolio's return in 1998 ranked it in the top quartile of
similar funds and provided investors with an 11% premium over
the Lipper Flexible average, which was up only 13.5% in 1998.
The Capital Appreciation Portfolio returned 22.2%, ranking in
the second quartile of the Lipper Capital Appreciation group,
which on average had an identical 22.2% return for the year.
LOW-TO MID-TEEN RETURNS FOR SPECIALIZED FUNDS
Two Portfolios, Strategic Multi-Asset and Foreign Securities,
provided investors with low-to mid-teen returns in 1998.
Strategic Multi-Asset (which is a global and more aggressive
sister fund to Multi-Asset) returned 15.2% in 1998, ranking in
the top quartile of similar Lipper Global flexible funds.
Foreign Securities returned 10.7%, while the Lipper
international equity average returned 13.3%.
HIGH SINGLE-DIGIT RETURNS FOR HIGH QUALITY BONDS
The Government and Quality Bond Portfolio, which has an
average credit quality of AAA, led the pack in 1998 with a 9.2%
return, placing it in the top quartile of its Lipper category
and outperforming the Lehman Aggregate return of 8.7%. The Fixed
Income Portfolio (which has a higher weighting in investment
grade corporate bonds and high yield bonds) returned 8.0%. The
Money Market Portfolio provided investors with a 5.1% return in
1998, identical to the IBC Average return of similar funds, but
slightly below the Lipper return of 5.10%.
CHALLENGING MARKETS AND NEGATIVE RETURNS FOR TWO PORTFOLIOS
Two asset classes were especially challenging in 1998. High
Yield funds were on a roller-coaster ride, while
commodity-related investments suffered as the price of oil in
particular reached a 22-year low, and gold a 19-year low. Not
surprisingly, the Natural Resources Portfolio was not immune to
this environment, returning -17.3% for the year. On a relative
basis, this was a 3.4% performance premium to similar funds as
measured by the Lipper VA Natural Resource Average return of
-20.7% in 1998. The High Yield
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2
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Portfolio returned -4.5% for the year compared to 1.9% for the
purely U.S.-invested (and before all expenses) return of the
Lehman High Yield Index and 0.1% for the Lipper High Yield
competitive group average.
1999 OUTLOOK
Our outlook for 1999 is for global economic growth to remain
in positive territory. However, we do expect to see global
economic growth slow to 1.3% from an anticipated 1.5% level in
1998. In the United States, we expect reasonably solid demand to
prevail, but not at recently robust rates. We believe a growing
trade deficit will subtract one percentage point from 1999's
growth rate in the U.S. As many producers trim inventories, we
expect output to fall early in 1999. Companies are beginning to
respond to disappointing earnings by reducing capital spending
budgets. Hence, U.S. capital goods producers will see slowing
demand in 1999. The U.S. consumer will anchor the economy, but
some slowing in consumption seems inevitable if employment
decelerates as we expect. We believe the central banks of the
major economies will continue to cut interest rates in 1999,
aiding economies and markets globally. Inflation pressures
should be largely subdued, helped by oil prices. We expect
economic trends to begin improving in the second-half of 1999.
As many of the major financial markets experienced another
positive year in 1998, we are optimistic about the prospects for
further positive returns in 1999. While future results may be
less robust and uncertain, the expectation is for many
interesting investment opportunities to be uncovered in the
various markets represented within the Anchor Series Trust
Portfolios through fundamental, proprietary research. We remain
committed to helping you achieve your long-term goals by
striving to uncover promising investment opportunities as they
arise. As always, we encourage investors to look closely at the
allocation of their assets to determine if they are meeting
their long-term investment plan and periodically meet with their
financial representative.
This concludes the overview from Wellington Management
Company, LLP. We look forward to reporting to you once again in
six month's time and appreciate the confidence you place in us
with your investment assets.
Sincerely,
/s/ ELI BROAD
Eli Broad
Chairman and Chief Executive Officer,
Anchor National Life Insurance Company
First SunAmerica Life Insurance Company
February 22, 1999
-------------------------------
Note: All performance figures quoted are for the Anchor Series
Trust. They do not reflect fees and charges associated with the
variable annuity. Past performance is no guarantee of future
results.
Investments in stocks and bonds are subject to risk, including
stock market and interest rate fluctuations. Investments in
non-U.S. stocks and bonds are subject to additional risks,
including fluctuations, political and social instability,
differing securities regulations and accounting standards and
limited public information. High-yield bonds tend to be subject
to greater price swings than higher-rated bonds and, of course,
payment of interest and principal is not assured. Mortgage-
backed securities are subject to prepayment, which can result in
reinvestment of principal at lower yields. Investments in
securities related to gold or other precious metals and minerals
are considered speculative and are impacted by a host of
worldwide economic, financial and political factors. Money
market instruments generally offer stability and income, but an
investment in these securities is not guaranteed by the U.S.
government or any other entity.
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ANCHOR SERIES TRUST
MONEY MARKET PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 100.1% AMOUNT VALUE
<S> <C> <C>
---------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
ASSET BACKED SECURITIES -- 2.3%
Strategic Money Market Trust 5.64% 3/16/99(1)
(cost $1,500,000)......................................... $1,500,000 $ 1,500,000
------------
BANK NOTES -- 15.3%
Bank One Wisconsin 5.55% due 2/23/99........................ 1,000,000 999,916
Chase Manhattan Bank 5.70% due 7/02/99...................... 1,000,000 999,666
Deutsche Bank AG 5.82% due 5/04/99.......................... 1,500,000 1,499,710
KeyBank NA 4.70% due 1/04/99(1)............................. 2,000,000 1,999,454
Regions Bank 5.77% due 5/21/99.............................. 1,500,000 1,499,835
Societe Generale 5.68% due 3/22/99.......................... 1,500,000 1,499,716
Svenska Handelsbanken 5.74% due 6/01/99..................... 1,500,000 1,499,584
------------
TOTAL BANK NOTES (cost $9,997,881).......................... 9,997,881
------------
COMMERCIAL PAPER -- 64.1%
Aesop Funding Corp. 5.47% due 1/29/99....................... 1,315,000 1,309,405
Associates Corp. of North America 5.01% due 2/12/99......... 2,000,000 1,988,310
BankAmerica Corp. 5.04% due 3/11/99......................... 1,000,000 990,340
Campbell Soup Co. 5.20% due 1/04/99......................... 1,000,000 999,567
Centric Capital Corp. 5.07% due 3/05/99..................... 2,470,000 2,448,085
Chrysler Financial Corp. L.L.C. 5.05% due 2/19/99........... 2,500,000 2,482,816
CIT Group, Inc. (The) 5.37% due 2/09/99..................... 1,000,000 994,182
Corporate Asset Funding Co., Inc. 5.32% due 1/29/99......... 1,980,000 1,971,807
Den Norske Stats Oljeselskap A/S 5.32% due 1/21/99.......... 2,000,000 1,994,089
Enterprise Funding Corp. 5.45% due 1/29/99.................. 1,420,000 1,413,981
Ford Credit Europe PLC 5.03% due 4/20/99.................... 2,000,000 1,969,540
General Electric Capital Corp. 4.89% due 6/14/99............ 2,000,000 1,955,447
Gillette Co. 5.15% due 1/04/99.............................. 1,960,000 1,959,159
Glaxo Wellcome PLC 5.03% due 3/26/99........................ 2,000,000 1,976,527
GTE Funding, Inc. 5.18% due 2/18/99......................... 2,000,000 1,986,187
IBM Credit Corp. 5.05% due 1/25/99.......................... 2,100,000 2,092,930
Kitty Hawk Funding Corp. 5.50% due 2/26/99.................. 2,000,000 1,982,889
Metlife Funding, Inc. 5.27% due 1/27/99..................... 2,000,000 1,992,388
Montana Blanc Capital Corp. 5.22% due 3/05/99............... 1,800,000 1,783,557
National Rural Utilities Cooperative Finance Corp. 5.02% due
3/26/99................................................... 2,000,000 1,976,573
Park Avenue Receivables Corp. 5.50% due 2/04/99............. 1,775,000 1,765,780
Preferred Receivables Funding Corp. 5.40% due 1/22/99....... 2,000,000 1,993,700
Sears Roebuck Acceptance Corp. 5.05% due 3/03/99............ 2,000,000 1,982,886
------------
TOTAL COMMERCIAL PAPER (cost $42,010,145)................... 42,010,145
------------
CORPORATE SHORT-TERM NOTES -- 3.0%
Monumental Life Insurance Co. 5.32% due 2/02/99(1)
(cost $2,000,000)......................................... 2,000,000 2,000,000
------------
MEDIUM TERM NOTES -- 1.5%
Morgan (J.P.) & Co., Inc. 5.75% due 3/10/99
(cost $1,000,000)......................................... 1,000,000 1,000,000
------------
</TABLE>
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4
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<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES (CONTINUED) AMOUNT VALUE
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<S> <C> <C>
U.S. GOVERNMENT & AGENCIES -- 13.9%
Federal Home Loan Mortgage Corp. 4.89% due 3/17/99.......... $4,000,000 $ 3,959,292
Federal Home Loan Mortgage Corp. 5.00% due 3/12/99.......... 2,500,000 2,475,694
Federal National Mortgage Association 5.07% due 2/18/99..... 2,680,000 2,661,883
------------
TOTAL U.S. GOVERNMENT & AGENCIES (cost $9,096,869).......... 9,096,869
------------
TOTAL SHORT-TERM SECURITIES (cost $65,604,895).............. 65,604,895
------------
TOTAL INVESTMENTS -- (cost $65,604,895) 100.1% 65,604,895
Liabilities in excess of other
assets -- (0.1) (51,582)
----- ------------
NET ASSETS -- 100.0% $65,553,313
===== ============
</TABLE>
-----------------------------
(1) Variable rate security -- the rate reflected is as of December
31, 1998; maturity date reflects next reset date.
See Notes to Financial Statements
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ANCHOR SERIES TRUST
FIXED INCOME PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 97.2% AMOUNT VALUE
<S> <C> <C>
---------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
AEROSPACE & MILITARY TECHNOLOGY -- 0.3%
Argo-Tech Corp. 8.63% 2007.................................. $ 20,000 $ 19,000
K & F Industries, Inc., Series B 9.25% 2007................. 10,000 10,100
L-3 Communications Corp. 8.00% 2008*........................ 5,000 5,013
Moog, Inc., Series B 10.00% 2006............................ 25,000 25,625
------------
59,738
------------
AUTOMOTIVE -- 1.9%
Accuride Corp., Series B 9.25% 2008......................... 10,000 10,175
Collins & Aikman Corp. 11.50% 2006.......................... 5,000 5,200
Ford Motor Co. 9.00% 2001................................... 250,000 272,507
Johnstown America Industries, Inc., Series C 11.75% 2005.... 20,000 21,050
LDM Technologies, Inc., Series B 10.75% 2007................ 20,000 19,600
------------
328,532
------------
CABLE -- 1.2%
Adelphia Communications Corp. 8.38% 2008.................... 5,000 5,125
Century Communications Corp., Series B zero coupon 2008..... 35,000 17,938
Classic Cable, Inc. 9.88% 2008*............................. 5,000 5,200
NTL, Inc. zero coupon 2008*................................. 10,000 6,313
Rifkin Acquisitions Partners L.P. 11.13% 2006............... 10,000 11,000
Tele-Communications, Inc. 9.25% 2002........................ 150,000 166,792
------------
212,368
------------
CHEMICALS -- 0.3%
ARCO Chemical Co. 9.80% 2020................................ 5,000 5,003
Huntsman Corp. 9.50% 2007*.................................. 10,000 9,975
LaRoche Industries, Inc., Series B 9.50% 2007............... 10,000 8,000
Pioneer Americas Acquisition Corp., Series B 9.25% 2007..... 10,000 7,775
Sovereign Specialty Chemicals, Series B 9.50% 2007.......... 10,000 9,950
Texas Petrochemicals Corp. 11.13% 2006...................... 15,000 14,700
------------
55,403
------------
COMMUNICATIONS & MEDIA -- 2.1%
Allbritton Communications Co., Series B 8.88% 2008.......... 15,000 15,112
EchoStar DBS Corp. 12.50% 2002.............................. 10,000 11,500
Granite Broadcasting Corp. 8.88% 2008....................... 15,000 14,250
Innova S. de R.L. 12.88% 2007............................... 20,000 13,000
Jacor Communications Co., Series B 8.75% 2007............... 10,000 10,850
Lin Holdings Corp. zero coupon 2008(1)...................... 30,000 20,700
Loews Cineplex Entertainment Corp. 8.88% 2008............... 10,000 10,275
News America Holdings, Inc. 9.25% 2013...................... 200,000 247,746
Sullivan Graphics, Inc. 12.75% 2005......................... 20,000 20,300
------------
363,733
------------
CONSUMER STAPLES -- 1.1%
Boise Cascade Office Products Co. 7.05% 2005................ 190,000 178,362
Revlon Consumer Products Corp. 8.63% 2008................... 5,000 4,550
Revlon Worldwide Corp., Series B zero coupon 2001........... 20,000 11,500
True Temper Sports, Inc. 10.88% 2008*....................... 5,000 5,038
------------
199,450
------------
</TABLE>
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6
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY -- 1.8%
Abraxas Petroleum Corp. 11.50% 2004......................... $ 10,000 $ 7,600
Costilla Energy, Inc. 10.25% 2006........................... 20,000 14,150
Cross Timbers Oil Co., Series B 9.25% 2007.................. 10,000 9,250
Dailey International, Inc. 9.50% 2008....................... 15,000 6,900
Newfield Exploration Co. Series B 7.45% 2007................ 45,000 43,848
P&L Coal Holdings Corp. 9.63% 2008.......................... 35,000 35,525
Petroleos Mexicanos 8.85% 2007.............................. 25,000 22,562
Plains Resources, Inc., Series B 10.25% 2006................ 20,000 20,000
YPF Sociedad Anonima 8.00% 2004............................. 160,000 152,000
------------
311,835
------------
FINANCE -- 20.9%
Abbey National First Capital 8.20% 2004..................... 250,000 279,357
Amerus Capital I 8.85% 2027................................. 150,000 154,397
AMRESCO, Inc. 9.88% 2005.................................... 10,000 7,000
Banponce Financial Corp. 6.75% 2001......................... 300,000 302,961
Contifinancial Corp. 8.13% 2008............................. 10,000 7,000
Credit National 7.00% 2005.................................. 190,000 194,676
Dime Capital Trust I, Series A 9.33% 2027................... 150,000 162,012
Equitable Cos., Inc. 7.00% 2028............................. 180,000 187,049
Export-Import Bank Korea 6.38% 2006......................... 250,000 212,815
Japan Finance Corp. Municipal Enterprises 9.13% 2000........ 400,000 425,584
KFW International Finance, Inc. 9.13% 2001.................. 400,000 434,756
Ohio National Life Insurance Co. 8.50% 2026*................ 200,000 235,688
Olympic Financial Ltd. 11.50% 2007*......................... 10,000 7,475
Security Benefit Life Co. 8.75% 2016*....................... 200,000 217,748
Sun Canada Financial Co. 7.25% 2015*........................ 300,000 331,653
United States Bancorp 7.50% 2026............................ 400,000 456,932
Western Financial Savings Bank 8.88% 2007................... 25,000 18,750
------------
3,635,853
------------
FOOD & LODGING -- 0.1%
Aurora Foods, Inc., Series E 8.75% 2008..................... 5,000 5,206
Delaware Monte Foods Co., Series B zero coupon 2007(1)...... 25,000 17,469
------------
22,675
------------
GAMING -- 0.2%
Argosy Gaming Co. 13.25% 2004............................... 10,000 11,213
Fitzgeralds Gaming Corp., Series B 12.25% 2004.............. 5,000 2,700
Station Casinos, Inc. 8.88% 2008*........................... 15,000 15,075
------------
28,988
------------
GROCERY -- 0.0%
Disco SA 9.88% 2008......................................... 5,000 4,225
Stater Brothers Holdings, Inc. 9.00% 2004................... 5,000 4,850
------------
9,075
------------
HEALTHCARE -- 0.9%
Owens & Minor, Inc. 10.88% 2006............................. 15,000 16,069
Tenet Healthcare Corp. 7.88% 2003........................... 120,000 122,400
Universal Hospital Services, Inc. 10.25% 2008............... 15,000 13,181
------------
151,650
------------
INDUSTRIAL & COMMERCIAL -- 2.0%
Allegiance Corp. 7.00% 2026................................. 150,000 158,723
Cincinnati Milacron, Inc. 7.88% 2000........................ 150,000 151,854
Consumers International, Inc. 10.25% 2005................... 5,000 5,294
Grove Worldwide LLC 9.25% 2008.............................. 15,000 13,500
Neenah Corp., Series B 11.13% 2007.......................... 10,000 10,325
WESCO Distribution, Inc., Series B 9.13% 2008............... 15,000 15,206
------------
354,902
------------
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY -- 0.5%
Advanced Micro Devices, Inc. 11.00% 2003.................... $ 25,000 $ 26,500
DecisionOne Corp. 9.75% 2007................................ 10,000 4,575
Fairchild Semiconductor Corp. 10.13% 2007................... 15,000 15,000
Telecommunications Techniques Co. 9.75% 2008................ 15,000 14,569
Verio, Inc. 10.38% 2005..................................... 10,000 9,875
Verio, Inc. 11.25% 2008*.................................... 10,000 10,075
------------
80,594
------------
METALS & MINERALS -- 0.2%
Acindar Industria Argentina de Aceros SA 11.25% 2004........ 10,000 8,000
Bayou Steel Corp. 9.50% 2008................................ 15,000 14,100
Falcon Building Products, Inc., Series B 9.50% 2007......... 15,000 13,125
------------
35,225
------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.1%
Republic of Colombia 7.25% 2004............................. 145,000 123,250
Republic of Lithuania 7.13% 2002*(2)........................ 70,000 65,100
------------
188,350
------------
PAPER PRODUCTS -- 0.5%
American Pad & Paper Co., Series B 13.00% 2005.............. 17,000 9,775
Domtar, Inc. 9.50% 2016..................................... 10,000 10,048
Gaylord Container Corp. 9.38% 2007.......................... 10,000 8,500
Grupo Industrial Durango SA de CV 12.63% 2003............... 15,000 13,125
Pindo Deli Finance Mauritius Ltd. 10.75% 2007............... 10,000 5,325
Repap New Brunswick, Inc. 10.63% 2005....................... 25,000 16,750
Silgan Holdings Corp. 9.00% 2009............................ 10,000 10,125
Tembec Finance Corp. 9.88% 2005............................. 10,000 10,450
------------
84,098
------------
REAL ESTATE -- 0.7%
Engle Homes, Inc., Series B 9.25% 2008...................... 5,000 5,000
Equity Office Properties Operating LP 6.38% 2003............ 100,000 98,724
Standard Pacific Corp. 8.50% 2007........................... 15,000 15,225
------------
118,949
------------
RETAIL -- 1.5%
Duane Reade, Inc. 9.25% 2008................................ 20,000 20,600
Guitar Center Management Co., Inc. 11.00% 2006.............. 17,000 17,467
J.C. Penney Co., Inc. 7.40% 2037............................ 200,000 217,432
------------
255,499
------------
TELECOMMUNICATIONS -- 1.9%
AMSC Acquisition, Inc. 12.25% 2008.......................... 5,000 3,188
BTI Telecom Corp. 10.50% 2007............................... 20,000 15,100
Concentric Network Corp. Delaware 12.75% 2007............... 10,000 10,075
E. Spire Communications, Inc. zero coupon 2006(1)........... 20,000 12,000
GCI, Inc. 9.75% 2007........................................ 25,000 24,750
Globalstar LP 10.75% 2004................................... 20,000 14,400
GST Telecommunications, Inc. 12.75% 2007+................... 20,000 19,050
Intermedia Communications, Inc. 8.60% 2008.................. 10,000 9,550
Intermedia Communications, Inc., Series B 8.88% 2007........ 25,000 24,125
Iridium LLC 11.25% 2005..................................... 15,000 12,825
ITC Deltacom, Inc. 8.88% 2008............................... 10,000 10,050
IXC Communications, Inc. 9.00% 2008......................... 10,000 10,075
KMC Telecom Holdings, Inc. zero coupon 2008(1).............. 50,000 24,062
Level 3 Communications, Inc. 9.13% 2008..................... 25,000 24,781
MGC Communications, Inc., Series B 13.00% 2004.............. 5,000 3,250
MobileMedia Corp. 9.38% 2007+(3)............................ 50,000 5,000
Nextel Communications, Inc. zero coupon 2007................ 60,000 36,600
Nextlink Communications, Inc. zero coupon 2008.............. 25,000 14,375
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS (continued)
Paging Network, Inc. 10.13% 2007............................ $ 15,000 $ 14,400
PSINet, Inc. 10.00% 2005.................................... 15,000 14,700
PSINet, Inc. 11.50% 2008*................................... 5,000 5,188
RSL Communications PLC 9.13% 2008........................... 10,000 9,350
Time Warner Telecom, Inc. 9.75% 2008........................ 5,000 5,225
Viatel, Inc. 11.25% 2008(2)................................. 10,000 9,900
------------
332,019
------------
TRANSPORTATION -- 0.1%
MTL, Inc. 10.00% 2006*...................................... 10,000 9,675
------------
U.S. GOVERNMENT & AGENCIES -- 51.3%
Federal Home Loan Mortgage Corp. 6.00% 2013................. 500,854 502,572
Federal Home Loan Mortgage Corp. 7.50% 2027................. 378,615 388,789
Federal Home Loan Participation 11.00% 2000................. 2,836 2,911
Federal National Mortgage Association 6.00% 2028............ 502,043 495,451
Government National Mortgage Association 7.00%
2012 - 2023............................................... 911,818 933,780
Government National Mortgage Association 7.50%
2022 - 2023............................................... 609,025 628,435
Government National Mortgage Association 10.00% 2000........ 11,333 11,519
United States Treasury Bonds 8.88% 2019..................... 250,000 356,055
United States Treasury Bonds 12.00% 2013.................... 3,685,000 5,625,963
------------
8,945,475
------------
UTILITIES -- 6.6%
Cleveland Electric Illuminating Co., Series B 7.19% 2000.... 160,000 162,365
Energy Corp. America, Series A 9.50% 2007................... 20,000 18,700
Niagara Mohawk Power Corp. 5.88% 2002....................... 750,000 759,307
WorldCom, Inc. 7.55% 2004................................... 200,000 218,096
------------
1,158,468
------------
TOTAL BONDS & NOTES (cost $16,579,599)...................... 16,942,554
------------
<CAPTION>
COMMON STOCK -- 0.0% SHARES
---------------------------------------------------------------------------------------
<S> <C> <C>
MULTI-INDUSTRY -- 0.0%
Sinking Fund Holding Group, Inc., Class C+*(2) (cost $29)... 74 148
------------
PREFERRED STOCK -- 0.3%
---------------------------------------------------------------------------------------
COMMUNICATIONS & MEDIA -- 0.1%
Primedia, Inc. Series H 8.63%............................... 145 14,065
------------
INDUSTRIAL & COMMERCIAL -- 0.1%
Fairfield Manufacturing, Inc. 11.25%(2)(4).................. 25 24,000
------------
MULTI-INDUSTRY -- 0.1%
Sinking Fund Holdings Group, Inc. Series B 13.75%(2)(4)..... 2 8,600
------------
TELECOMMUNICATIONS -- 0.0%
Viatel, Inc., Convertible Series A 10.00%*(2)............... 5 559
------------
TOTAL PREFERRED STOCK (cost $58,591)........................ 47,224
------------
</TABLE>
---------------------
9
<PAGE> 11
<TABLE>
WARRANTS -- 0.0%+ SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS -- 0.0%
American Mobile Satellite Co. 4/01/08*(2)................... 5 $ 19
Concentric Network Corp. Delaware 12/15/07(2)............... 5 745
KMC Telecom Holdings, Inc. 4/15/08*(2)...................... 50 125
------------
TOTAL WARRANTS (cost $126).................................. 889
------------
TOTAL INVESTMENT SECURITIES (cost $16,638,345).............. 16,990,815
------------
PRINCIPAL
REPURCHASE AGREEMENT -- 0.6% AMOUNT
---------------------------------------------------------------------------------------
Joint Repurchase Agreement Account (See Note 3)
(cost $115,000)............................................ $ 115,000 115,000
------------
TOTAL INVESTMENTS -- (cost $16,753,345) 98.1% 17,105,815
Other assets less liabilities -- 1.9 324,521
----- ------------
NET ASSETS -- 100.0% $17,430,336
===== ============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
(1) Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
(2) Fair valued security; see Note 2
(3) Issuer of the security has filed for bankruptcy and interest
payments are in default
(4) PIK ("Payment-in-Kind") payment made with additional
securities in lieu of cash
See Notes to Financial Statements
- ---------------------
10
<PAGE> 12
- ---------------------
ANCHOR SERIES TRUST
GOVERNMENT & QUALITY BOND
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 98.2% AMOUNT VALUE
<S> <C> <C>
-----------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CONSUMER DISCRETIONARY -- 2.9%
J.C. Penney Co., Inc. 7.40% 2037............................ $ 5,000,000 $ 5,435,800
Wal-Mart Stores, Inc. 6.75% 2023............................ 5,000,000 5,431,650
-------------
10,867,450
-------------
FINANCE -- 14.2%
Associates Corp. North America 6.00% 2005................... 5,000,000 5,073,950
Chrysler Financial Corp. 4.91% 2000......................... 5,000,000 4,966,650
Citicorp 6.75% 2007......................................... 5,000,000 5,322,600
CS First Boston Mortgage Securities Corp. 7.24% 2029........ 5,000,000 5,326,550
Ford Motor Credit Co. 7.20% 2007............................ 5,000,000 5,508,600
General Electric Capital Corp. 7.50% 2035................... 5,000,000 5,860,100
General Reinsurance Corp. 9.00% 2009........................ 5,000,000 6,214,950
Morgan (J.P.) & Co., Inc. 6.25% 2005........................ 5,000,000 5,093,850
Stanford University 6.88% 2024.............................. 5,000,000 5,164,000
Toyota Motor Credit Corp. 5.50% 2008........................ 5,000,000 4,973,500
-------------
53,504,750
-------------
INDUSTRIAL & COMMERCIAL -- 5.7%
Diageo Capital PLC 6.13% 2005............................... 5,000,000 5,163,350
Motorola, Inc. 5.80% 2008................................... 5,000,000 5,103,050
Postal Square LP 8.95% 2022................................. 4,701,200 6,137,557
Santiago Air SA 6.95% 2012*................................. 5,000,000 4,957,200
-------------
21,361,157
-------------
INFORMATION & ENTERTAINMENT -- 3.0%
Continental Airlines 6.32% 2008............................. 5,000,000 5,031,750
Disney (Walt) Co. 5.80% 2008................................ 6,000,000 6,112,500
-------------
11,144,250
-------------
TRANSPORTATION -- 3.0%
Federal Express Corp. 6.72% 2022(1)......................... 5,000,000 5,196,850
United Parcel Service of America, Inc. 8.38% 2020........... 5,000,000 6,210,300
-------------
11,407,150
-------------
U.S. GOVERNMENT & AGENCIES -- 66.3%
Federal Home Loan Banks 5.13% 2003.......................... 35,000,000 34,989,150
Federal Home Loan Mortgage Corp. 5.75% 2003................. 35,000,000 35,902,300
Federal Home Loan Mortgage Corp. 6.00% 2008 - 2013.......... 16,766,480 16,841,534
Federal Home Loan Mortgage Corp. 6.50% 2011................. 9,730,993 9,886,008
Federal Home Loan Mortgage Corp. 7.00% 2010 - 2011.......... 12,212,800 12,475,286
Federal Home Loan Mortgage Corp. 14.75% 2010................ 100,612 119,476
Federal National Mortgage Association 6.00% 2009 - 2028..... 34,986,175 34,901,807
Federal National Mortgage Association 6.50% 2028............ 668,438 675,122
Federal National Mortgage Association 7.00% 2010 - 2011..... 4,592,989 4,690,655
Government National Mortgage Association 6.50% TBA.......... 7,037,511 7,107,887
Government National Mortgage Association 6.50%
2026 - 2028............................................... 29,193,067 29,485,612
Government National Mortgage Association 7.00%
2009 - 2012............................................... 7,786,271 7,978,917
Government National Mortgage Association 7.50% TBA.......... 9,766,000 10,068,062
Government National Mortgage Association 10.00%
2013 - 2017............................................... 1,513,625 1,619,073
Government National Mortgage Association 11.50% 2014........ 8,497 9,290
Government National Mortgage Association 12.00%
1999 - 2016............................................... 33,795 35,341
Government National Mortgage Association 12.75% 2014........ 77,288 88,326
</TABLE>
---------------------
11
<PAGE> 13
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (continued)
Government National Mortgage Association 13.25% 2014........ $ 17,048 $ 19,526
Government National Mortgage Association 13.50% 2014........ 6,609 7,667
Government National Mortgage Association 13.75% 2014........ 594 679
United States Treasury Notes 5.50% 2000..................... 10,000,000 10,098,400
United States Treasury Notes 5.63% 2002..................... 27,000,000 27,898,560
United States Treasury Notes 6.13% 2007..................... 4,000,000 4,368,760
-------------
249,267,438
-------------
UTILITIES -- 3.1%
Hydro Quebec Electric 8.40% 2022............................ 5,000,000 6,219,800
United States West Capital Funding, Inc. 6.38% 2008......... 5,000,000 5,289,400
-------------
11,509,200
-------------
TOTAL INVESTMENT SECURITIES (cost $361,615,470)............. 369,061,395
-------------
<CAPTION>
REPURCHASE AGREEMENT -- 3.2%
-----------------------------------------------------------------------------------------
<S> <C> <C>
Joint Repurchase Agreement Account (See Note 3) (cost
$11,965,000).............................................. 11,965,000 11,965,000
-------------
TOTAL INVESTMENTS --
(cost $373,580,470) 101.4% 381,026,395
Liabilities in excess of other assets -- (1.4) (5,359,020)
------ -------------
NET ASSETS -- 100.0% $375,667,375
====== =============
</TABLE>
-----------------------------
* Resale restricted to qualified institutional buyers
(1) Fair valued security; see Note 2
TBA -- Securities purchased on a forward commitment basis with an
approximate principal amount and no definitive maturity
date. The actual principal amount and maturity date will be
determined upon settlement.
See Notes to Financial Statements
- ---------------------
12
<PAGE> 14
- ---------------------
ANCHOR SERIES TRUST
HIGH YIELD PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 88.6% AMOUNT VALUE
<S> <C> <C>
---------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
AEROSPACE & MILITARY TECHNOLOGY -- 2.6%
Argo-Tech Corp. 8.63% 2007.................................. $ 100,000 $ 95,000
L-3 Communications Corp. 8.50% 2008......................... 250,000 260,000
Moog, Inc., Series B 10.00% 2006............................ 320,000 328,000
------------
683,000
------------
AUTOMOTIVE -- 3.7%
Accuride Corp., Series B 9.25% 2008......................... 220,000 223,850
Federal Mogul Corp. 8.80% 2007.............................. 150,000 159,744
Hayes Wheels International, Inc., Series B 9.13% 2007....... 100,000 104,250
Johnstown America Industries, Inc. Series C 11.75% 2005..... 350,000 368,375
LDM Technologies, Inc., Series B 10.75% 2007................ 115,000 112,700
------------
968,919
------------
CABLE -- 5.6%
Adelphia Communications Corp., Series B 9.88% 2007.......... 250,000 276,562
Century Communications Corp., Series B zero coupon 2008..... 500,000 256,250
Falcon Holding Group L.P., Series B zero coupon 2010(1)..... 350,000 241,062
Frontiervision Holding L.P. zero coupon 2007(1)............. 350,000 292,250
Multicanal SA 10.50% 2007................................... 100,000 90,000
Rifkin Acquisitions Partners L.P. 11.13% 2006............... 150,000 165,000
Rogers Communications, Inc. 8.88% 2007...................... 150,000 154,500
------------
1,475,624
------------
CHEMICALS -- 4.4%
ARCO Chemical Co. 9.80% 2020................................ 250,000 250,140
Phillipp Brothers Chemicals, Inc. 9.88% 2008*............... 150,000 146,625
Pioneer Americas Acquisition Corp., Series B 9.25% 2007..... 250,000 194,375
Sovereign Specialty Chemicals, Series B 9.50% 2007.......... 500,000 497,500
Texas Petrochemicals Corp. 11.13% 2006...................... 50,000 49,000
------------
1,137,640
------------
COMMUNICATIONS & MEDIA -- 7.8%
Allbritton Communications Co., Series B 8.88% 2008.......... 100,000 100,750
Big Flowers Press Holdings, Inc. 8.63% 2008*................ 165,000 165,206
Citadel Broadcasting Co. 9.25% 2008*........................ 35,000 36,531
Fox Liberty Networks LLC 8.88% 2007......................... 150,000 153,000
Globo Comunicacoes E Participating 10.50% 2006*............. 250,000 151,250
Innova S. de R.L. 12.88% 2007............................... 250,000 162,500
Loews Cineplex Entertainment Corp. 8.88% 2008............... 150,000 154,125
Mail-Well Corp. 8.75% 2008*................................. 145,000 145,363
Outdoor Systems, Inc. 8.88% 2007............................ 150,000 160,125
Primedia, Inc. 7.63% 2008................................... 65,000 63,375
Sullivan Graphics, Inc. 12.75% 2005......................... 100,000 101,500
Sun Media Corp. 9.50% 2007.................................. 150,000 166,500
Tevecap SA, Series B 12.63% 2004............................ 150,000 85,500
TV Azteca SA de CV, Series B 10.50% 2007.................... 300,000 252,000
World Color Press, Inc. 8.38% 2008*......................... 150,000 150,375
------------
2,048,100
------------
CONSUMER STAPLES -- 4.2%
Allied Waste North America, Inc. 7.63% 2006*................ 135,000 136,013
Iron Mountain, Inc. 8.75% 2009.............................. 150,000 154,500
Pierce Leahy Corp. 9.13% 2007............................... 150,000 156,750
</TABLE>
---------------------
13
<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES (continued)
True Temper Sports, Inc. 10.88% 2008*....................... $ 150,000 $ 151,125
Unicco Service Co./Unicco Finance Corp., Series B 9.88%
2007...................................................... 150,000 146,437
Westpoint Stevens, Inc. 7.88% 2008.......................... 345,000 353,625
------------
1,098,450
------------
ENERGY -- 4.7%
Abraxas Petroleum Corp. 11.50% 2004......................... 250,000 190,000
Costilla Energy, Inc. 10.25% 2006........................... 370,000 261,775
Cross Timbers Oil Co., Series B 9.25% 2007.................. 100,000 92,500
Kelley Oil & Gas Corp., Series B 10.38% 2006................ 40,000 29,400
P&L Coal Holdings Corp. 8.88% 2008.......................... 160,000 163,200
Plains Resources, Inc., Series B 10.25% 2006................ 150,000 150,000
Ram Energy, Inc. 11.50% 2008................................ 500,000 328,750
------------
1,215,625
------------
FINANCE -- 3.2%
Emergent Group, Inc., Series B 10.75% 2004.................. 220,000 97,350
Guangdong Enterprises Holdings 8.88% 2007*.................. 250,000 113,750
Resource America, Inc. 12.00% 2004.......................... 195,000 160,388
Thai Farmers Bank Ltd. 8.25% 2016*.......................... 500,000 279,370
Western Financial Savings Bank 8.88% 2007................... 250,000 187,500
------------
838,358
------------
FOOD & LODGING -- 3.2%
Aurora Foods, Inc., Series D 9.88% 2007..................... 65,000 70,688
Delaware Monte Foods Co., Series B zero coupon 2007(1)...... 750,000 524,062
Hammons (John Q.) Hotels L.P. 8.88% 2004.................... 150,000 139,500
Purina Mills, Inc. 9.00% 2010............................... 95,000 97,613
------------
831,863
------------
GAMING -- 1.0%
Lady Luck Gaming Finance Corp. 11.88% 2001.................. 250,000 252,500
------------
GROCERY -- 0.9%
Homeland Stores, Inc. 10.00% 2003........................... 145,000 133,038
Pathmark Stores, Inc. 11.63% 2002........................... 100,000 95,500
------------
228,538
------------
HEALTHCARE -- 4.6%
Beverly Enterprises, Inc. 9.00% 2006........................ 250,000 255,000
Columbia/HCA Healthcare Corp. 7.25% 2008.................... 250,000 240,150
Mediq/Life Support Services, Inc. 11.00% 2008............... 150,000 142,125
Pharmerica, Inc. 8.38% 2008................................. 100,000 89,750
Tenet Healthcare Corp. 8.13% 2008*.......................... 250,000 258,365
Universal Hospital Services, Inc. 10.25% 2008............... 250,000 219,687
------------
1,205,077
------------
INDUSTRIAL & COMMERCIAL -- 4.6%
Boise Cascade Corp. 9.45% 2009.............................. 100,000 110,633
Exodus Communications, Inc. 11.25% 2008..................... 100,000 100,500
Henry Co., Series B 10.00% 2008............................. 150,000 151,125
International Wire Group, Inc. 11.75% 2005.................. 250,000 265,000
Neenah Corp., Series B 11.13% 2007.......................... 150,000 154,875
Rayovac Corp., Series B 10.25% 2006......................... 150,000 160,125
WESCO Distribution, Inc., Series B 9.13% 2008............... 250,000 253,438
------------
1,195,696
------------
INFORMATION TECHNOLOGY -- 5.7%
Advanced Micro Devices, Inc. 11.00% 2003.................... 135,000 143,100
DecisionOne Corp. zero coupon 2008(1)....................... 500,000 105,000
Fisher Scientific International, Inc. 9.00% 2008............ 250,000 247,500
</TABLE>
- ---------------------
14
<PAGE> 16
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (continued)
Samsung Electronics America, Inc. 9.75% 2003*............... $ 350,000 $ 332,314
Telecommunications Techniques Co. 9.75% 2008................ 150,000 145,688
Unisys Corp. 7.88% 2008..................................... 150,000 159,000
Verio, Inc. 10.38% 2005..................................... 100,000 98,750
Verio, Inc. 11.25% 2008*.................................... 250,000 251,875
------------
1,483,227
------------
METALS & MINERALS -- 6.9%
A.K. Steel Holding Corp. 9.13% 2006......................... 100,000 104,750
Amersteel Corp. 8.75% 2008.................................. 150,000 144,000
Associated Materials, Inc. 9.25% 2008....................... 150,000 148,500
Bayou Steel Corp. 9.50% 2008................................ 250,000 235,000
CSN Iron SA 9.13% 2007*..................................... 350,000 213,500
Falcon Building Products, Inc., Series B 9.50% 2007......... 150,000 131,250
Nortek, Inc. 8.88% 2008*.................................... 35,000 35,525
Nortek, Inc., Series B 9.25% 2007........................... 250,000 258,750
Pohang Iron & Steel Ltd. 7.13% 2004......................... 250,000 210,495
Weirton Steel Corp. 11.38% 2004............................. 250,000 222,500
Wells Aluminum Corp., Series B 10.13% 2005.................. 94,000 87,420
------------
1,791,690
------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.9%
Federal Republic of Brazil 5.00% 2014(5)(6)................. 147,203 87,769
Republic of Korea 8.88% 2008................................ 100,000 102,931
Republic of Venezuela 9.25% 2027............................ 100,000 59,000
------------
249,700
------------
PAPER PRODUCTS -- 9.4%
American Pad & Paper Co., Series B 13.00% 2005.............. 475,000 273,125
APP Finance (VII) Mauritius Ltd. 3.50% 2003*................ 305,000 167,750
APP International Finance Co. 11.75% 2005................... 100,000 66,000
Aracruz Celulose SA 10.38% 2002*............................ 255,000 219,300
Bahia Sul Celulose SA 10.63% 2004........................... 150,000 114,750
Buckeye Technologies, Inc. 8.00% 2010....................... 100,000 99,250
BWAY Corp., Series B 10.25% 2007............................ 150,000 157,125
Container Corp. of America 9.75% 2003....................... 250,000 255,000
Container Corp. of America, Series B 10.75% 2002............ 40,000 41,600
Gaylord Container Corp. 9.38% 2007.......................... 210,000 178,500
Pindo Deli Finance Mauritius Ltd. 10.75% 2007............... 355,000 189,037
Repap New Brunswick, Inc. 10.63% 2005....................... 150,000 100,500
Silgan Holdings Corp. 9.00% 2009............................ 500,000 506,250
Silgan Holdings Corp. 13.25% 2006(4)........................ 80,000 87,000
------------
2,455,187
------------
REAL ESTATE -- 1.9%
Beazer Homes USA, Inc. 8.88% 2008........................... 250,000 237,500
Ryland Group, Inc. 8.25% 2008............................... 100,000 96,000
US Home Corp. 8.88% 2007.................................... 150,000 151,500
------------
485,000
------------
TELECOMMUNICATIONS -- 11.1%
AMSC Acquisition, Inc. 12.25% 2008.......................... 150,000 95,625
BTI Telecom Corp. 10.50% 2007............................... 270,000 203,850
Concentric Network Corp. Delaware 12.75% 2007............... 130,000 130,975
E. Spire Communications, Inc. zero coupon 2006(1)........... 150,000 90,000
GST Telecommunications, Inc. zero coupon 2008*(1)........... 885,000 389,400
GST Telecommunications, Inc. 12.75% 2007+................... 100,000 95,250
Hyperion Telecommunications, Inc., Series B 12.25% 2004..... 240,000 242,400
ICO Global Commerce 15.00% 2005............................. 105,000 78,750
Intermedia Communications, Inc. 8.60% 2008.................. 100,000 95,500
IXC Communications, Inc. 9.00% 2008......................... 150,000 151,125
</TABLE>
---------------------
15
<PAGE> 17
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS (continued)
Korea Telecommunications 7.63% 2007......................... $ 350,000 $ 301,231
McLeod USA, Inc. 9.25% 2007................................. 100,000 103,500
MGC Communications, Inc., Series B 13.00% 2004.............. 100,000 65,000
MobileMedia Corp. 9.38% 2007+(3)............................ 250,000 25,000
PSINet, Inc. 10.00% 2005.................................... 100,000 98,000
PSINet, Inc. 11.50% 2008*................................... 150,000 155,625
Time Warner Telecom, Inc. 9.75% 2008........................ 100,000 104,500
Winstar Communications, Inc. zero coupon 2005(1)............ 650,000 470,437
------------
2,896,168
------------
TRANSPORTATION -- 1.7%
Cathay International Ltd. 13.00% 2008*...................... 250,000 91,250
Continental Airlines, Inc. 8.00% 2005....................... 135,000 134,494
Mrs Logistica SA 10.63% 2005*............................... 135,000 67,500
Valujet, Inc. 10.25% 2001................................... 250,000 141,250
------------
434,494
------------
UTILITIES -- 0.5%
Energy Corp. America, Series A 9.50% 2007................... 150,000 140,250
------------
TOTAL BONDS & NOTES (cost $26,256,331)...................... 23,115,106
------------
<CAPTION>
COMMON STOCK -- 0.0% SHARES
---------------------------------------------------------------------------------------
<S> <C> <C>
GAMING -- 0.0%
Fitzgeralds Gaming Corp.(2)................................. 3,762 1,881
------------
MULTI-INDUSTRY -- 0.0%
Sinking Fund Holding Group, Inc., Class C+*(2).............. 629 1,258
------------
TOTAL COMMON STOCK (cost $283).............................. 3,139
------------
PREFERRED STOCK -- 4.0%
---------------------------------------------------------------------------------------
COMMUNICATIONS & MEDIA -- 0.4%
Granite Broadcasting Corp. 12.75%(4)........................ 107 96,441
------------
FINANCE -- 0.9%
Superior National Capital Trust I 10.75%(2)................. 250 247,500
------------
GAMING -- 0.1%
Fitzgeralds Gaming Corp. 15.00%+*(2)........................ 3,000 30,000
------------
INDUSTRIAL & COMMERCIAL -- 1.3%
Fairfield Manufacturing, Inc. 11.25%(2)(4).................. 350 336,000
------------
MULTI-INDUSTRY -- 0.3%
Sinking Fund Holdings Group, Inc. Series B 13.75%(2)(4)..... 17 73,100
------------
TELECOMMUNICATIONS -- 1.0%
Concentric Network Corp. Delaware 13.50%(4)................. 180 151,200
IXC Communications, Inc. 6.75%*............................. 3,500 115,938
------------
267,138
------------
TOTAL PREFERRED STOCK (cost $1,292,820)..................... 1,050,179
------------
</TABLE>
- ---------------------
16
<PAGE> 18
<TABLE>
<CAPTION>
WARRANTS -- 0.1%+ SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS & MEDIA -- 0.0%
Benedek Communications Corp. 07/01/07*(2)....................................... 2,000 $ 4,000
-------------
TELECOMMUNICATIONS -- 0.1%
Concentric Network Corp. Delaware 12/15/07(2)................................... 130 19,358
MGC Communications, Inc. 10/01/04*.............................................. 250 8,000
-------------
27,358
-------------
TOTAL WARRANTS (cost $22,550)................................................... 31,358
-------------
TOTAL INVESTMENT SECURITIES (cost $27,571,984).................................. 24,199,782
-------------
PRINCIPAL
REPURCHASE AGREEMENT -- 5.8% AMOUNT
- ------------------------------------------------------------------------------------------------------------
Joint Repurchase Agreement Account (See Note 3) (cost $1,495,000)............... $ 1,495,000 1,495,000
-------------
TOTAL INVESTMENTS -- (cost $29,066,984) 98.5% 25,694,782
Other assets less liabilities -- 1.5 403,979
----- -------------
NET ASSETS -- 100.0% $ 26,098,761
===== =============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
(1) Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
(2) Fair valued security; see Note 2
(3) Issuer of the security has filed for bankruptcy and interest
payments are in default
(4) PIK ("Payment-in-Kind") payment made with additional security
in lieu of cash
(5) Variable rate security; rate as of December 31, 1998
(6) A portion of the coupon interest is received in cash and a
portion is capitalized in the principal of the security
See Notes to Financial Statements
---------------------
17
<PAGE> 19
- ---------------------
ANCHOR SERIES TRUST
GROWTH AND INCOME
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK -- 97.2% SHARES VALUE
<S> <C> <C>
---------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CONSUMER DISCRETIONARY -- 6.8%
Retail -- 6.8%
CVS Corp. .................................................. 10,000.... $ 550,000
Gap, Inc. .................................................. 17,100.... 961,875
May Department Stores Co. .................................. 12,000.... 724,500
Wal-Mart Stores, Inc. ...................................... 16,000.... 1,303,000
------------
3,539,375
------------
CONSUMER STAPLES -- 9.9%
Food, Beverage & Tobacco -- 5.5%
Anheuser-Busch Cos., Inc. .................................. 8,000..... 525,000
Coca-Cola Co. .............................................. 6,100..... 407,937
General Mills, Inc. ........................................ 3,000..... 233,250
Heinz (H.J.) Co. ........................................... 4,500..... 254,813
PepsiCo, Inc. .............................................. 12,100.... 495,344
Philip Morris Cos., Inc. ................................... 12,000.... 642,000
Sara Lee Corp. ............................................. 11,000.... 310,062
Household Products -- 4.4%
Colgate-Palmolive Co. ...................................... 1,700..... 157,888
Gillette Co. ............................................... 10,000.... 483,125
Kimberly-Clark Corp. ....................................... 14,000.... 763,000
Procter & Gamble Co. ....................................... 10,000.... 913,125
------------
5,185,544
------------
ENERGY -- 6.8%
Energy Services -- 1.0%
Diamond Offshore Drilling, Inc. ............................ 3,400..... 80,537
Schlumberger Ltd. .......................................... 10,000.... 461,250
Energy Sources -- 5.8%
Amoco Corp. ................................................ 9,600..... 579,600
Chevron Corp. .............................................. 9,300..... 771,319
Exxon Corp. ................................................ 9,600..... 702,000
Royal Dutch Petroleum Co.-NY Registry Shares GDR............ 16,200.... 775,575
Unocal Corp. ............................................... 6,400..... 186,800
------------
3,557,081
------------
FINANCE -- 16.2%
Banks -- 8.0%
Chase Manhattan Corp. ...................................... 3,900..... 265,444
Citigroup, Inc. ............................................ 30,250.... 1,497,375
First Union Corp. .......................................... 14,100.... 857,456
U.S. Bancorp................................................ 16,500.... 585,750
Wachovia Corp. ............................................. 11,000.... 961,813
Financial Services -- 4.1%
American Express Co. ....................................... 8,000..... 818,000
Federal National Mortgage Association....................... 12,700.... 939,800
Merrill Lynch & Co., Inc. .................................. 5,900..... 393,825
</TABLE>
- ---------------------
18
<PAGE> 20
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Insurance -- 4.1%
Ace Ltd. ................................................... 16,400.... $ 564,775
American International Group, Inc. ......................... 9,000..... 869,625
Marsh & McLennan Cos., Inc. ................................ 12,000.... 701,250
------------
8,455,113
------------
HEALTHCARE -- 15.1%
Drugs -- 10.9%
American Home Products Corp. ............................... 16,800.... 946,050
Bristol-Myers Squibb Co. ................................... 5,000..... 669,063
Johnson & Johnson Co. ...................................... 10,000.... 838,750
Merck & Co., Inc. .......................................... 4,200..... 620,288
Pfizer, Inc. ............................................... 5,800..... 727,537
Pharmacia & Upjohn, Inc. ................................... 14,000.... 792,750
Warner-Lambert Co. ......................................... 9,000..... 676,687
Zeneca Group PLC ADR........................................ 10,000.... 448,750
Health Services -- 1.5%
Columbia/HCA Healthcare Corp. .............................. 20,800.... 514,800
Service Corp. International................................. 6,900..... 262,631
Medical Products -- 2.7%
Abbott Laboratories, Inc. .................................. 16,000.... 784,000
Baxter International, Inc. ................................. 9,500..... 610,969
------------
7,892,275
------------
INDUSTRIAL & COMMERCIAL -- 8.5%
Aerospace & Military Technology -- 1.0%
Boeing Co. ................................................. 9,000..... 293,625
General Motors Corp., Class H+.............................. 5,200..... 206,375
Electrical Equipment -- 3.7%
General Electric Co. ....................................... 19,000.... 1,939,187
Electronics -- 2.0%
Intel Corp. ................................................ 9,000..... 1,067,062
Machinery -- 1.0%
Deere & Co. ................................................ 5,600..... 185,500
Tyco International Ltd. .................................... 4,600..... 347,013
Transportation -- 0.8%
Union Pacific Corp. ........................................ 9,000..... 405,563
------------
4,444,325
------------
INFORMATION & ENTERTAINMENT -- 6.1%
Broadcasting & Media -- 3.0%
Cox Communications, Inc., Class A+.......................... 4,100..... 283,412
Disney (Walt) Co. .......................................... 17,000.... 510,000
Gannett, Inc. .............................................. 12,100.... 780,450
Entertainment Products -- 0.4%
Eastman Kodak Co. .......................................... 3,100..... 223,200
Leisure & Tourism -- 2.7%
AMR Corp.+.................................................. 8,200..... 486,875
McDonald's Corp. ........................................... 11,700.... 896,513
------------
3,180,450
------------
</TABLE>
---------------------
19
<PAGE> 21
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY -- 15.6%
Communication Equipment -- 3.0%
Cisco Systems, Inc.+........................................ 10,350.... $ 960,610
Lucent Technologies, Inc. .................................. 2,700..... 297,000
Motorola, Inc. ............................................. 4,900..... 299,206
Computers & Business Equipment -- 5.8%
EMC Corp.+.................................................. 6,600..... 561,000
Hewlett-Packard Co. ........................................ 3,900..... 266,419
International Business Machines Corp. ...................... 7,400..... 1,367,150
Xerox Corp. ................................................ 7,000..... 826,000
Electronics -- 0.6%
Analog Devices, Inc.+....................................... 6,800..... 213,350
Texas Instruments, Inc. .................................... 1,400..... 119,787
Software -- 6.2%
Automatic Data Processing, Inc. ............................ 7,700..... 617,443
Computer Sciences Corp.+.................................... 8,100..... 521,944
First Data Corp. ........................................... 12,800.... 405,600
Microsoft Corp.+............................................ 12,000.... 1,664,250
------------
8,119,759
------------
MATERIALS -- 1.9%
Chemicals -- 1.7%
Dow Chemical Co. ........................................... 1,000..... 90,937
du Pont (E.I.) de Nemours & Co. ............................ 10,300.... 546,544
Monsanto Co. ............................................... 5,600..... 274,400
Metals & Minerals -- 0.2%
Aluminum Co. of America..................................... 1,200..... 89,475
------------
1,001,356
------------
UTILITIES -- 10.3%
Electric Utilities -- 2.4%
DPL, Inc. .................................................. 12,800.... 276,800
Enron Corp. ................................................ 2,700..... 154,069
GPU, Inc. .................................................. 6,700..... 296,056
Pinnacle West Capital Corp. ................................ 6,000..... 254,250
Texas Utilities Co. ........................................ 5,700..... 266,119
Gas & Pipeline Utilities -- 0.9%
National Fuel Gas Co. ...................................... 5,700..... 257,569
Peoples Energy Corp. ....................................... 4,800..... 191,400
Telephone -- 7.0%
Bell Atlantic Corp. ........................................ 13,700.... 726,100
BellSouth Corp. ............................................ 12,400.... 618,450
MCI WorldCom, Inc.+......................................... 12,900.... 925,575
SBC Communications, Inc. ................................... 20,000.... 1,072,500
U.S. West, Inc. ............................................ 4,900..... 316,662
------------
5,355,550
------------
TOTAL INVESTMENT SECURITIES (cost $33,876,619).............. .......... 50,730,828
------------
</TABLE>
- ---------------------
20
<PAGE> 22
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 2.8% AMOUNT VALUE
PRINCIPAL
REPURCHASE AGREEMENT -- 2.8% AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joint Repurchase Agreement Account (See Note 3) (cost $1,445,000)............... $1,445,000 $ 1,445,000
-------------
TOTAL INVESTMENTS -- (cost $35,321,619) 100.0% 52,175,828
Other assets less liabilities -- 0.0 13,811
----- -------------
NET ASSETS -- 100.0% $ 52,189,639
===== =============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR -- American Depository Receipts
GDR -- Global Depository Receipts
See Notes to Financial Statements
---------------------
21
<PAGE> 23
- ---------------------
ANCHOR SERIES TRUST
FOREIGN SECURITIES
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK -- 96.0% SHARES VALUE
<S> <C> <C>
---------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
AUSTRALIA -- 3.6%
AMP Ltd. (Industrial & Commercial)+*........................ 19,768 $ 250,446
Australia & New Zealand Banking Group Ltd. (Finance)........ 41,392 270,891
News Corp., Ltd. (Information & Entertainment).............. 12,487 82,487
Pasminco Ltd. (Materials)................................... 146,682 111,456
Rio Tintro, Ltd. (Materials)................................ 8,113 96,224
Telstra Corp. (Utilities)+.................................. 21,576 100,879
Western Mining Corp., Ltd. (Materials)...................... 54,482 164,257
------------
1,076,640
------------
BRAZIL -- 0.3%
Embratel Participacoes SA ADR (Utilities)................... 3,200 44,600
Telesp Celular Participacoes SA ADR (Information &
Entertainment)............................................ 1,900 33,250
------------
77,850
------------
CANADA -- 0.6%
Canadian National Railway Co. (Industrial & Commercial)..... 3,500 181,562
------------
CHINA -- 0.4%
China Telecom (Hong Kong) Ltd. ADR (Information &
Entertainment)+........................................... 1,400 48,650
China Telecom (Hong Kong) Ltd. (Information &
Entertainment)+........................................... 39,100 67,626
------------
116,276
------------
DENMARK -- 1.3%
Unidanmark A/S, Class A (Finance)........................... 4,440 401,144
------------
FINLAND -- 2.0%
Metsa Serla Oy, Class B (Materials)......................... 8,380 68,204
Nokia AB Oy, Series A (Information Technology).............. 4,220 513,120
------------
581,324
------------
FRANCE -- 14.4%
Alcatel Alsthom, Inc. (Information Technology).............. 3,840 469,784
AXA SA de CV (Finance)...................................... 2,880 417,242
Banque Nationale de Paris (Finance)......................... 7,061 581,197
Compagnie de St. Gobain (Materials)......................... 1,377 194,322
Compagnie Financiere de Paribas SA (Finance)................ 3,960 344,012
Establissements Economiques du Casino Guichard-Perrachon SA
(Consumer Discretionary).................................. 1,830 190,495
France Telecom SA (Utilities)............................... 1,930 153,268
Groupe Danone (Consumer Staples)............................ 290 82,991
Renault SA (Consumer Discretionary)......................... 2,020 90,685
Rhone-Poulenc SA (Healthcare)............................... 1,945 100,050
Societe Nationale Elf Aquitaine SA (Energy)................. 1,820 210,288
STMicroelectronics NV (Information Technology)+............. 1,700 132,706
Suez Lyonnaise des Eaux (Utilities)......................... 1,050 215,596
Total SA, Class B (Energy).................................. 3,836 388,334
Vivendi SA (Utilities)...................................... 2,750 713,200
------------
4,284,170
------------
</TABLE>
- ---------------------
22
<PAGE> 24
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
GERMANY -- 6.4%
Bayer AG (Healthcare)....................................... 6,270 $ 261,658
DaimlerChrysler AG (Consumer Discretionary)+................ 1,550 152,991
Hoechst AG (Healthcare)..................................... 11,440 474,321
Karstadt AG (Consumer Discretionary)........................ 550 287,112
Mannesmann AG (Information Technology)...................... 3,570 409,138
Siemens AG (Industrial & Commercial)........................ 4,940 318,643
------------
1,903,863
------------
GREECE -- 0.2%
Panafon Hellenic Telecom SA (Information Technology)+*...... 2,500 66,993
------------
HONG KONG -- 1.0%
Cheung Kong Holdings Ltd. (Industrial & Commercial)......... 22,000 158,307
Sun Hung Kai Properties Ltd. (Real Estate).................. 19,000 138,559
------------
296,866
------------
HUNGARY -- 0.1%
Matav RT ADR (Utilities).................................... 600 17,888
------------
IRELAND -- 1.8%
Allied Irish Banks PLC (Finance)............................ 29,952 533,453
------------
ITALY -- 3.8%
Banca Commerciale Italiana (Finance)........................ 52,700 363,349
ENI SpA (Energy)............................................ 42,000 274,336
Telecom Italia SpA (Utilities).............................. 57,200 487,780
------------
1,125,465
------------
JAPAN -- 14.4%
Advantest Corp. (Information Technology).................... 2,100 133,003
Asahi Bank Ltd. (Finance)................................... 42,000 153,808
Bridgestone Corp. (Consumer Discretionary).................. 4,000 90,756
Daiwa Securities Co., Ltd. (Finance)........................ 40,000 136,577
Eisai Co., Ltd. (Healthcare)................................ 10,000 194,604
Fuji Bank Ltd. (Finance).................................... 28,000 103,034
Fuji Machine Manufacturing Co. (Industrial & Commercial).... 4,000 126,316
Fuji Photo Film Co., Ltd. (Information & Entertainment)..... 6,000 222,910
Fujisawa Pharmaceutical Co. (Healthcare).................... 14,000 198,142
Jafco Co., Ltd. (Finance)................................... 1,000 27,068
KAO Corp. (Consumer Staples)................................ 4,000 90,226
Mabuchi Motor Co., Ltd. (Industrial & Commercial)........... 2,000 153,030
Matsumotokiyoshi (Consumer Discretionary)................... 6,400 247,395
Matsushita Communication Industrial Co. (Information
Technology)............................................... 2,000 94,295
NEC Corp. (Information Technology).......................... 13,000 119,593
Nichiei Co., Ltd. (Finance)................................. 2,200 175,144
Nippon Telegraph & Telephone Corp. (Information
Technology)............................................... 5 205,661
Olympus Optical Co. (Healthcare)............................ 27,000 310,243
Rohm Co. Ltd. (Information Technology)...................... 2,000 182,043
Sakura Bank Ltd. (Finance).................................. 51,000 116,842
Sony Corp. (Information & Entertainment).................... 4,600 334,878
Takeda Chemical Industries Ltd. (Healthcare)................ 2,000 76,957
Takefuji Corp. (Finance).................................... 1,300 94,870
Tokyo Style Co. (Consumer Discretionary).................... 7,000 70,836
Toshiba Corp. (Information Technology)...................... 57,000 339,328
Uni-Charm Corp. (Consumer Staples).......................... 4,600 215,657
Yamanouchi Pharmaceutical Co., Ltd. (Healthcare)............ 2,000 64,396
------------
4,277,612
------------
</TABLE>
---------------------
23
<PAGE> 25
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
MEXICO -- 0.3%
Telefonos de Mexico SA ADR (Utilities)...................... 1,600 $ 77,900
------------
NETHERLANDS -- 7.0%
AEGON NV (Finance).......................................... 1,600 196,391
Gucci Group NV NY Registry Shares (Consumer
Discretionary)............................................ 5,200 252,850
ING Groep NV (Finance)...................................... 4,109 250,429
Koninklijke Ahold NV (Consumer Discretionary)............... 3,400 125,597
Philips Electronics NV (Information Technology)............. 6,200 415,819
Royal Dutch Petroleum Co. (Energy).......................... 2,900 144,329
TNT Post Group NV (Industrial & Commercial)................. 8,642 278,299
Unilever NV (Consumer Staples).............................. 4,800 410,071
------------
2,073,785
------------
SOUTH AFRICA -- 0.4%
De Beers Centenary AG (Materials)........................... 1,600 20,372
Liberty Life Association (Finance).......................... 3,834 52,723
South African Breweries (Consumer Staples).................. 3,000 50,524
------------
123,619
------------
SOUTH KOREA -- 0.5%
Korea Telecommunciations Corp. (Utilities)+................. 100 3,159
Pohang Iron & Steel Co., Ltd. ADR (Materials)............... 5,260 88,763
SK Telecom Co., Ltd ADR (Information Technology)............ 5,943 60,545
------------
152,467
------------
SPAIN -- 3.3%
Banco de Santander SA (Finance)............................. 2,900 57,543
Endesa SA (Utilities)....................................... 20,600 545,004
Repsol SA (Energy).......................................... 1,700 90,550
Telefonica SA ADR (Utilities)............................... 2,095 283,622
------------
976,719
------------
SWEDEN -- 4.6%
Ericsson L.M. Telecommunications Co., Class B (Information
Technology)............................................... 4,930 117,110
Hennes & Mauritz AB, Class B (Consumer Discretionary)....... 2,820 229,771
Nordbanken AB (Finance)..................................... 46,390 296,903
Pharmacia & Upjohn, Inc. (Healthcare)....................... 13,120 733,123
------------
1,376,907
------------
SWITZERLAND -- 4.5%
Holderbank Financiere Glarus AG (Materials)................. 200 236,733
Nestle SA (Consumer Staples)................................ 79 171,952
Novartis AG (Healthcare).................................... 110 216,204
Roche Holdings AG (Healthcare).............................. 20 244,013
Swisscom AG (Utilities)..................................... 690 288,818
UBS AG (Finance)............................................ 600 184,320
------------
1,342,040
------------
TAIWAN -- 0.7%
Taiwan Semiconductor Manufacturing Co., Ltd. ADR
(Information Technology)+................................. 14,790 209,833
------------
UNITED KINGDOM -- 23.6%
Allied Domecq PLC (Consumer Staples)........................ 15,000 138,686
Bank of Scotland (Finance).................................. 19,200 229,673
Billiton PLC (Materials).................................... 54,300 108,257
BOC Group PLC (Materials)................................... 16,000 229,407
British America Tobacco PLC (Consumer Staples).............. 41,000 361,023
British Petroleum Co. PLC (Energy).......................... 30,715 457,229
British Telecommunications PLC (Utilities).................. 17,200 260,329
Cable & Wireless Communication PLC (Utilities)+............. 12,100 110,365
</TABLE>
- ---------------------
24
<PAGE> 26
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (continued)
Cadbury Schweppes PLC (Consumer Staples).................... 12,700 $ 217,328
Compass Group PLC (Information & Entertainment)............. 44,300 505,634
Diageo PLC (Consumer Staples)............................... 21,036 233,287
Glaxo Wellcome PLC (Healthcare)............................. 10,300 354,570
Granada Group PLC (Information & Entertainment)............. 2,300 40,314
Great Universal Stores PLC (Consumer Discretionary)......... 5,400 56,970
HSBC Holdings PLC (Finance)................................. 5,000 137,730
National Westminster Bank PLC (Finance)..................... 16,000 309,686
Next PLC (Consumer Discretionary)........................... 38,100 312,067
Orange PLC (Information Technology)......................... 16,100 184,566
Powergen PLC (Utilities).................................... 4,600 60,375
Rentokil Initial PLC (Industrial & Commercial).............. 51,600 390,065
Scottish Power PLC (Utilities).............................. 26,700 275,029
Siebe PLC (Industrial & Commercial)......................... 76,400 300,193
SmithKline Beecham PLC (Healthcare)......................... 48,053 665,980
Standard Chartered PLC (Finance)............................ 23,700 274,840
Vodafone Group PLC (Information & Entertainment)............ 33,900 550,826
Zeneca Group PLC (Healthcare)............................... 5,300 230,879
------------
6,995,308
------------
UNITED STATES -- 0.8%
Schlumberger Ltd. (Energy).................................. 5,300 244,462
------------
TOTAL COMMON STOCK (cost $24,650,085)....................... 28,514,146
------------
<CAPTION>
PREFERRED STOCK -- 0.2%
---------------------------------------------------------------------------------------
<S> <C> <C>
BRAZIL -- 0.2%
Telesp Participacoes (Utilities)............................ 2,300,000 52,346
------------
GERMANY -- 0.0%
ProSieben Media AG (Information & Entertainment)*........... 10 462
------------
TOTAL PREFERRED STOCK (cost $67,550)........................ 52,808
------------
PRINCIPAL
BONDS & NOTES -- 0.0% AMOUNT
---------------------------------------------------------------------------------------
BRAZIL -- 0.0%
Companhia Vale do Rio Doce zero coupon 1999+(1)............. $ 5,500 1
------------
TOTAL INVESTMENT SECURITIES (cost $24,717,635).............. 28,566,955
------------
SHORT-TERM SECURITIES -- 0.4%
---------------------------------------------------------------------------------------
U.S. GOVERNMENT -- 0.4%
United States Treasury Bills 3.61% due 1/14/99.............. 75,000 74,902
United States Treasury Bills 3.80% due 1/14/99.............. 50,000 49,932
------------
TOTAL U.S. GOVERNMENT (cost $124,834)....................... 124,834
------------
</TABLE>
---------------------
25
<PAGE> 27
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 3.4% AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Joint Repurchase Agreement Account (See Note 3) (cost
$1,015,000)............................................... $1,015,000 $ 1,015,000
------------
TOTAL SHORT-TERM SECURITIES (cost $1,139,834)............... 1,139,834
------------
TOTAL INVESTMENTS -- (cost $25,857,469) 100.0% 29,706,789
Liabilities in excess of other assets -- 0.0 (5,567)
----- ------------
NET ASSETS -- 100.0% $29,701,222
===== ============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
(1) Fair valued security; see Note 2
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACT IN DELIVERY GROSS UNREALIZED
TO DELIVER EXCHANGE FOR DATE DEPRECIATION
--------------------------------------------------------
<S> <C> <C> <C>
JPY 45,303,000 USD 375,740 1/13/99 $(25,687)
JPY 14,067,375 USD 122,357 1/13/99 (2,293)
JPY 28,024,000 USD 245,598 1/13/99 (2,720)
---------
Net Unrealized
Depreciation................. $(30,700)
=========
</TABLE>
JPY -- Japanese Yen
USD -- United States Dollar
See Notes to Financial Statements
- ---------------------
26
<PAGE> 28
- ---------------------
ANCHOR SERIES TRUST
GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK -- 97.5% SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CONSUMER DISCRETIONARY -- 8.4%
Retail -- 8.4%
Bed Bath & Beyond, Inc.+.................................... 15,800 $ 539,175
CVS Corp. .................................................. 126,002 6,930,110
Dayton Hudson Corp. ........................................ 190,000 10,307,500
Dollar General Corp. ....................................... 103,900 2,454,638
Ethan Allen Interiors, Inc. ................................ 47,000 1,927,000
Home Depot, Inc. ........................................... 217,100 13,283,806
Staples, Inc.+.............................................. 103,400 4,517,287
Stein Mart, Inc.+........................................... 106,100 739,384
Wal-Mart Stores, Inc. ...................................... 160,000 13,030,000
Whole Foods Market, Inc.+................................... 47,900 2,317,163
-------------
56,046,063
-------------
CONSUMER STAPLES -- 7.2%
Food, Beverage & Tobacco -- 3.5%
Beringer Wine Estates Holdings, Inc., Class B+.............. 47,500 2,122,656
Coca-Cola Co. .............................................. 41,600 2,782,000
PepsiCo, Inc. .............................................. 100,000 4,093,750
Philip Morris Cos., Inc. ................................... 154,000 8,239,000
Sara Lee Corp. ............................................. 221,200 6,235,075
Household Products -- 3.7%
Bush Boake Allen, Inc.+..................................... 67,000 2,361,750
Colgate-Palmolive Co. ...................................... 22,000 2,043,250
Estee Lauder Cos., Inc., Class A............................ 37,300 3,189,150
Gillette Co. ............................................... 64,000 3,092,000
Kimberly-Clark Corp. ....................................... 91,000 4,959,500
Procter & Gamble Co. ....................................... 98,000 8,948,625
-------------
48,066,756
-------------
ENERGY -- 3.7%
Energy Services -- 0.8%
Diamond Offshore Drilling, Inc. ............................ 63,800 1,511,263
Schlumberger Ltd. .......................................... 80,000 3,690,000
Energy Sources -- 2.9%
Barrett Resources Corp.+.................................... 20,500 492,000
Chevron Corp. .............................................. 75,000 6,220,312
Exxon Corp. ................................................ 98,500 7,202,812
Royal Dutch Petroleum Co.-NY Registry Shares GDR............ 122,700 5,874,263
-------------
24,990,650
-------------
</TABLE>
---------------------
27
<PAGE> 29
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 16.1%
Banks -- 7.1%
Associated Banc Corp. ...................................... 68,750 $ 2,350,391
BankAmerica Corp. .......................................... 84,881 5,103,470
Citigroup, Inc. ............................................ 287,500 14,231,250
First Union Corp. .......................................... 150,000 9,121,875
Mercantile Bankshares Corp. ................................ 73,000 2,810,500
State Street Corp. ......................................... 69,700 4,848,506
U.S. Bancorp................................................ 130,000 4,615,000
Westamerica Bancorp. ....................................... 45,900 1,686,825
Wilmington Trust Corp. ..................................... 50,000 3,081,250
Financial Services -- 4.8%
American Express Co. ....................................... 70,000 7,157,500
Associates First Capital Corp., Class A..................... 137,400 5,822,325
Federal National Mortgage Association....................... 123,100 9,109,400
FINOVA Group, Inc. ......................................... 32,700 1,763,756
Franklin Resources, Inc. ................................... 70,000 2,240,000
Merrill Lynch & Co., Inc. .................................. 93,500 6,241,125
Insurance -- 4.2%
Ace Ltd. ................................................... 171,000 5,888,812
American International Group, Inc. ......................... 102,375 9,891,984
Frontier Insurance Group, Inc. ............................. 122,100 1,572,038
Marsh & McLennan Cos., Inc. ................................ 120,150 7,021,266
Reinsurance Group America, Inc. ............................ 50,150 3,510,500
-------------
108,067,773
-------------
HEALTHCARE -- 14.8%
Drugs -- 8.7%
American Home Products Corp. ............................... 181,000 10,192,562
Genentech, Inc.+............................................ 47,400 3,777,187
Genzyme Corp.+.............................................. 78,700 3,915,325
Johnson & Johnson Co. ...................................... 64,700 5,426,712
Merck & Co., Inc. .......................................... 44,900 6,631,169
Pfizer, Inc. ............................................... 72,500 9,094,219
Pharmacia & Upjohn, Inc. ................................... 142,000 8,040,750
Warner-Lambert Co. ......................................... 88,100 6,624,019
Zeneca Group PLC ADR........................................ 102,000 4,577,250
Health Services -- 2.3%
Columbia/HCA Healthcare Corp. .............................. 182,800 4,524,300
Covance, Inc.+.............................................. 114,700 3,340,638
ServiceMaster Co. .......................................... 74,100 1,634,831
Shared Medical Systems Corp. ............................... 75,100 3,745,612
United HealthCare Corp. .................................... 53,800 2,316,763
Medical Products -- 3.8%
Abbott Laboratories, Inc. .................................. 180,000 8,820,000
Baxter International, Inc. ................................. 91,400 5,878,162
Biomet, Inc. ............................................... 13,700 551,425
Boston Scientific Corp.+.................................... 99,800 2,675,888
Henry Schein, Inc.+......................................... 45,800 2,049,550
Pall Corp. ................................................. 59,200 1,498,500
Perkin-Elmer Corp. ......................................... 37,900 3,697,619
-------------
99,012,481
-------------
</TABLE>
- ---------------------
28
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL -- 9.0%
Aerospace & Military Technology -- 1.4%
Boeing Co. ................................................. 100,000 $ 3,262,500
General Motors Corp., Class H+.............................. 63,800 2,532,063
United Technologies Corp. .................................. 35,000 3,806,250
Business Services -- 3.0%
Barnett, Inc.+.............................................. 92,500 1,271,875
Dames & Moore Group......................................... 105,000 1,351,875
G & K Services, Inc., Class A............................... 78,000 4,153,500
Ionics, Inc.+............................................... 65,900 1,972,881
Miller (Herman), Inc. ...................................... 39,500 1,061,563
Service Corp. International................................. 112,000 4,263,000
Tetra Tech, Inc.+........................................... 87,875 2,378,117
United Rentals, Inc.+....................................... 109,622 3,631,229
Electrical Equipment -- 2.9%
General Electric Co. ....................................... 165,000 16,840,312
Littelfuse, Inc.+........................................... 112,000 2,156,000
Machinery -- 0.7%
Donaldson Co., Inc. ........................................ 104,000 2,158,000
MSC Industrial Direct Co., Inc. Class A+.................... 102,600 2,321,325
Transportation -- 1.0%
Air Express International Corp. ............................ 94,000 2,044,500
C.H. Robinson Worldwide, Inc. .............................. 93,700 2,430,344
Union Pacific Corp. ........................................ 52,800 2,379,300
-------------
60,014,634
-------------
INFORMATION & ENTERTAINMENT -- 8.6%
Broadcasting & Media -- 5.9%
Acxiom Corp.+............................................... 62,000 1,922,000
ADVO, Inc.+................................................. 16,400 432,550
AirTouch Communications, Inc.+.............................. 74,500 5,373,312
Catalina Marketing Corp.+................................... 8,400 574,350
CBS Corp.+.................................................. 98,400 3,222,600
Cox Communications, Inc., Class A+.......................... 91,600 6,331,850
Disney (Walt) Co. .......................................... 198,900 5,967,000
Gannett, Inc. .............................................. 110,000 7,095,000
Liberty Media Group, Series A+.............................. 58,100 2,676,231
Time Warner, Inc. .......................................... 67,800 4,207,838
Univision Communications, Inc., Class A+.................... 35,400 1,281,038
Entertainment Products -- 0.4%
Speedway Motorsports, Inc.+................................. 100,300 2,858,550
Leisure & Tourism -- 2.3%
McDonald's Corp. ........................................... 98,000 7,509,250
Mirage Resorts, Inc.+....................................... 130,000 1,941,875
Southwest Airlines Co....................................... 267,850 6,009,884
-------------
57,403,328
-------------
INFORMATION TECHNOLOGY -- 23.8%
Communication Equipment -- 3.5%
Black Box Corp.+............................................ 40,400 1,530,150
Cisco Systems, Inc.+........................................ 135,300 12,557,532
Lucent Technologies, Inc. .................................. 38,034 4,183,740
Motorola, Inc. ............................................. 57,700 3,523,306
Tellabs, Inc.+.............................................. 27,300 1,871,756
</TABLE>
---------------------
29
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (continued)
Computers & Business Equipment -- 5.5%
Compaq Computer, Corp. ..................................... 151,800 $ 6,366,112
EMC Corp.+.................................................. 89,900 7,641,500
Hewlett-Packard Co. ........................................ 77,000 5,260,063
International Business Machines Corp. ...................... 69,100 12,766,225
Xerox Corp. ................................................ 38,300 4,519,400
Electronics -- 4.3%
Analog Devices, Inc.+....................................... 164,500 5,161,188
Applied Materials, Inc.+.................................... 72,000 3,073,500
Dallas Semiconductor Corp. ................................. 70,000 2,852,500
Intel Corp. ................................................ 94,800 11,239,725
Texas Instruments, Inc. .................................... 48,900 4,184,006
Xilinx, Inc.+............................................... 34,400 2,240,300
Software -- 10.5%
America Online, Inc.+....................................... 61,000 8,829,750
American Management Systems, Inc.+.......................... 29,800 1,192,000
Automatic Data Processing, Inc. ............................ 100,400 8,050,825
BISYS Group, Inc.+.......................................... 69,000 3,562,125
Cognos, Inc.+............................................... 135,000 3,375,000
Computer Sciences Corp.+.................................... 90,000 5,799,375
DST Systems, Inc.+.......................................... 49,400 2,818,888
First Data Corp............................................. 130,000 4,119,375
Microsoft Corp.+............................................ 129,000 17,890,687
PeopleSoft, Inc.+........................................... 102,500 1,941,094
Policy Management Systems Corp.+............................ 90,000 4,545,000
Sterling Software, Inc.+.................................... 138,800 3,756,275
Synopsys, Inc.+............................................. 50,000 2,712,500
Systems & Computer Technology Corp.+........................ 101,600 1,397,000
-------------
158,960,897
-------------
MATERIALS -- 1.7%
Chemicals -- 1.5%
du Pont (E.I.) de Nemours & Co. ............................ 85,700 4,547,456
Minerals Technologies, Inc. ................................ 66,300 2,714,156
Praxair, Inc. .............................................. 73,300 2,583,825
Forest Products -- 0.2%
Bemis Co., Inc. ............................................ 47,300 1,794,444
-------------
11,639,881
-------------
UTILITIES -- 4.2%
Telephone -- 4.2%
Bell Atlantic Corp. ........................................ 147,500 7,817,500
Century Telephone Enterprises, Inc. ........................ 10,700 722,250
MCI WorldCom, Inc.+......................................... 130,000 9,327,500
SBC Communications, Inc. ................................... 196,800 10,553,400
-------------
28,420,650
-------------
TOTAL INVESTMENT SECURITIES (cost $399,193,056)............. 652,623,113
-------------
</TABLE>
- ---------------------
30
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<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 2.9% AMOUNT VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
Joint Repurchase Agreement Account (See Note 3) (cost
$19,260,000).............................................. $19,260,000 $ 19,260,000
-------------
TOTAL INVESTMENTS -- (cost $418,453,056) 100.4% 671,883,113
Liabilities in excess of other assets -- (0.4) (2,553,272)
----- -------------
NET ASSETS -- 100.0% $669,329,841
===== =============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
See Notes to Financial Statements
---------------------
31
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- ---------------------
ANCHOR SERIES TRUST
CAPITAL APPRECIATION
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK -- 94.5% SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CONSUMER DISCRETIONARY -- 10.1%
Apparel & Textiles -- 0.3%
Tefron Ltd.+................................................ 445,000 $ 2,920,313
Retail -- 9.8%
Abercrombie & Fitch Co.+.................................... 205,300 14,524,975
Barnes & Noble, Inc.+....................................... 263,600 11,203,000
Bed Bath & Beyond, Inc.+.................................... 800,000 27,300,000
Gap, Inc. .................................................. 525,000 29,531,250
Home Depot, Inc. ........................................... 200,000 12,237,500
Hot Topic, Inc.+............................................ 210,500 2,710,187
Whole Foods Market, Inc.+................................... 225,000 10,884,375
---------------
111,311,600
---------------
CONSUMER STAPLES -- 1.0%
Food, Beverage & Tobacco -- 1.0%
McCormick & Co., Inc. ...................................... 160,000 5,410,000
United Natural Foods, Inc.+................................. 227,500 5,488,438
---------------
10,898,438
---------------
ENERGY -- 1.9%
Energy Services -- 1.5%
Santa Fe International Corp. ............................... 350,900 5,131,913
Transocean Offshore, Inc. .................................. 435,000 11,663,437
Energy Sources -- 0.4%
USX-Marathon Group, Inc. ................................... 150,000 4,518,750
---------------
21,314,100
---------------
FINANCE -- 9.1%
Financial Services -- 5.5%
Associates First Capital Corp., Class A..................... 271,400 11,500,575
CIT Group, Inc., Class A.................................... 195,000 6,203,437
Dain Rauscher Corp. ........................................ 75,000 2,212,500
Heller Financial, Inc., Class A............................. 492,000 14,452,500
Jefferies Group, Inc. ...................................... 94,100 4,669,713
Legg Mason, Inc. ........................................... 373,332 11,783,291
Merrill Lynch & Co., Inc. .................................. 105,000 7,008,750
Morgan Keegan, Inc. ........................................ 175,000 3,292,188
Insurance -- 3.6%
Ace Ltd. ................................................... 750,000 25,828,125
American Bankers Insurance Group, Inc. ..................... 150,000 7,256,250
Scottish Annuity Life+...................................... 72,560 997,700
Transatlantic Holdings, Inc. ............................... 67,500 5,100,469
---------------
100,305,498
---------------
</TABLE>
- ---------------------
32
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE -- 14.7%
Drugs -- 9.7%
Agouron Pharmaceuticals, Inc.+.............................. 160,000 $ 9,400,000
Genzyme Corp.+.............................................. 475,000 23,631,250
Gilead Sciences, Inc.+...................................... 145,000 5,954,063
Human Genome Sciences, Inc.+................................ 114,900 4,086,131
Immunex Corp.+.............................................. 140,000 17,613,750
Pharmacia & Upjohn, Inc. ................................... 250,000 14,156,250
Warner-Lambert Co. ......................................... 60,000 4,511,250
Zeneca Group PLC ADR........................................ 610,000 27,373,750
Health Services -- 2.1%
Columbia/HCA Healthcare Corp. .............................. 280,000 6,930,000
Covance, Inc.+.............................................. 210,000 6,116,250
Daou Systems, Inc.+......................................... 252,000 1,551,375
Stewart Enterprises, Inc., Class A.......................... 380,000 8,455,000
Medical Products -- 2.9%
Baxter International, Inc. ................................. 200,000 12,862,500
Ocular Sciences, Inc.+...................................... 165,000 4,413,750
Perkin-Elmer Corp. ......................................... 120,000 11,707,500
Respironics, Inc.+.......................................... 130,000 2,604,062
---------------
161,366,881
---------------
INDUSTRIAL & COMMERCIAL -- 5.6%
Aerospace & Military Technology -- 0.3%
General Motors Corp., Class H+.............................. 75,000 2,976,563
Business Services -- 3.7%
Comfort Systems USA, Inc.+.................................. 250,000 4,468,750
Group Maintenance America Corp.+............................ 185,000 2,243,125
Iron Mountain, Inc.+........................................ 232,500 8,384,531
Metzler Group, Inc. ........................................ 150,000 7,303,125
Pierce Leahy Corp.+......................................... 160,000 4,080,000
Select Appointments Holdings PLC ADR........................ 340,000 7,310,000
Service Experts, Inc.+...................................... 165,000 4,826,250
West TeleServices Corp.+.................................... 260,000 2,535,000
Electrical Equipment -- 0.8%
General Cable Corp. ........................................ 450,000 9,225,000
Transportation -- 0.8%
Werner Enterprises, Inc. ................................... 475,000 8,401,562
---------------
61,753,906
---------------
INFORMATION & ENTERTAINMENT -- 16.5%
Broadcasting & Media -- 15.8%
American Tower Corp., Class A+.............................. 700,000 20,693,750
CanWest Global Communications Corp. ........................ 163,100 1,997,975
Capstar Broadcasting Corp., Class A+........................ 210,000 4,803,750
Central European Media Enterprises Ltd., Class A+........... 140,000 918,750
Chancellor Media Corp.+..................................... 185,000 8,856,875
Clear Channel Communications, Inc.+......................... 200,000 10,900,000
Crown Castle International Corp.+........................... 550,000 12,925,000
EchoStar Communications Corp., Class A+..................... 175,000 8,465,625
Getty Images, Inc.+......................................... 381,000 6,548,437
Infinity Broadcasting Corp., Class A+....................... 131,500 3,599,813
Metro Networks, Inc.+....................................... 110,000 4,688,750
Outdoor Systems, Inc.+...................................... 485,000 14,550,000
Scripps (E.W.) Co., Class A................................. 215,100 10,701,225
</TABLE>
---------------------
33
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT(continued)
Broadcasting & Media (continued)
SFX Entertainment, Inc., Class A+........................... 100,000 $ 5,487,500
Tele-Communications Liberty Media Group, Class A+........... 1,000,000 46,062,500
Univision Communications, Inc., Class A+.................... 358,800 12,984,075
Leisure & Tourism -- 0.7%
American Skiing Co.+........................................ 200,200 1,539,037
Papa John's International, Inc.+............................ 125,000 5,515,625
---------------
181,238,687
---------------
INFORMATION TECHNOLOGY -- 31.2%
Communication Equipment -- 7.1%
ADC Telecommunications, Inc.+............................... 373,800 12,989,550
Alcatel Alsthom ADR......................................... 835,000 20,405,312
Ascend Communications, Inc.+................................ 425,000 27,943,750
Gilat Satellite Networks Ltd.+.............................. 155,000 8,544,375
Nokia AB Oy, Series A....................................... 75,000 9,032,813
Computers & Business Equipment -- 3.2%
EMC Corp.+.................................................. 300,000 25,500,000
Verisign, Inc.+............................................. 160,000 9,460,000
Electronics -- 5.1%
Analog Devices, Inc.+....................................... 200,000 6,275,000
Flextronics International Ltd.+............................. 67,000 5,736,875
Philips Electronics NV-NY Registry Shares................... 295,000 19,967,812
Rambus, Inc.+............................................... 50,000 4,812,500
Texas Instruments, Inc. .................................... 225,000 19,251,563
Software -- 15.8%
BISYS Group, Inc.+.......................................... 360,000 18,585,000
BMC Software, Inc.+......................................... 290,000 12,923,125
Ceridian Corp.+............................................. 305,000 21,292,812
Clarify, Inc.+.............................................. 135,000 3,299,063
Computer Sciences Corp.+.................................... 275,900 17,778,306
Electronic Arts, Inc.+...................................... 115,000 6,454,375
First Data Corp. ........................................... 655,000 20,755,312
Fundtech Ltd................................................ 126,000 2,598,750
Mobius Management Systems, Inc.+............................ 100,300 1,491,963
Policy Management Systems Corp.+............................ 150,000 7,575,000
Project Software & Development, Inc.+....................... 72,300 2,422,050
Rational Software Corp.+.................................... 520,000 13,780,000
Segue Software, Inc.+....................................... 343,000 6,945,750
SPR, Inc.+.................................................. 63,500 1,095,375
Sterling Software, Inc.+.................................... 695,000 18,808,437
The Learning Co., Inc.+..................................... 695,200 18,031,750
---------------
343,756,618
---------------
REAL ESTATE -- 0.4%
Real Estate Companies -- 0.4%
Security Capital Group, Inc., Class B+...................... 315,000 4,272,188
---------------
</TABLE>
- ---------------------
34
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- 4.0%
Telephone -- 4.0%
Allegiance Telecommunications, Inc.+........................ 380,000 $ 4,607,500
Colt Telecom Group PLC+..................................... 783,400 11,844,060
Intermedia Communications, Inc.+............................ 514,500 8,875,125
MCI WorldCom, Inc.+......................................... 115,000 8,251,250
NTL, Inc.+.................................................. 96,200 5,429,287
Swisscom AG ADR............................................. 115,000 4,894,688
---------------
43,901,910
---------------
TOTAL COMMON STOCK (cost $723,990,640)...................... 1,040,119,826
---------------
<CAPTION>
PREFERRED STOCK -- 0.7%
-------------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT -- 0.7%
Broadcasting & Media -- 0.7%
News Corp. Ltd. ADR (cost $4,691,342)....................... 300,000 7,406,250
---------------
TOTAL INVESTMENT SECURITIES (cost $728,681,982)............. $1,047,526,076
---------------
PRINCIPAL
REPURCHASE AGREEMENT -- 4.5% AMOUNT
-------------------------------------------------------------------------------------------
Joint Repurchase Agreement Account (See Note 3) (cost
$49,680,000).............................................. $49,680,000 49,680,000
---------------
TOTAL INVESTMENTS -- (cost $778,361,982) 99.7% 1,097,206,076
Other assets less liabilities -- 0.3 3,439,854
----- ---------------
NET ASSETS -- 100.0% $1,100,645,930
===== ===============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR -- American Depository Receipt
See Notes to Financial Statements
---------------------
35
<PAGE> 37
- ---------------------
ANCHOR SERIES TRUST
NATURAL RESOURCES
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK -- 94.9% SHARES VALUE
<S> <C> <C>
---------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
ENERGY -- 41.9%
Energy Services -- 5.2%
Baker Hughes, Inc. ......................................... 36,000 $ 636,750
BJ Services Co.+............................................ 24,500 382,812
J.Ray McDermott SA+......................................... 27,300 667,144
Weatherford International, Inc.+............................ 18,200 352,625
Energy Sources -- 36.7%
Alberta Energy Co., Ltd. ................................... 40,000 863,592
Anadarko Petroleum Corp. ................................... 12,000 370,500
Chevron Corp. .............................................. 20,000 1,658,750
Enron Oil & Gas Co. ........................................ 44,350 765,037
Kerr-McGee Corp. ........................................... 15,400 589,050
Norsk Hydro ASA ADR......................................... 30,000 1,025,625
PanCanadian Petroleum Ltd. ................................. 54,000 611,187
Poco Petroleum Ltd.+........................................ 60,000 502,453
Shell Transport & Trading Co. PLC........................... 28,900 1,074,719
Talisman Energy, Inc.+...................................... 39,500 696,451
Tosco Corp. ................................................ 41,600 1,076,400
Total SA ADR................................................ 23,193 1,153,852
Ultramar Diamond Shamrock Corp. ............................ 20,200 489,850
Unocal Corp. ............................................... 14,020 409,209
USX-Marathon Group, Inc. ................................... 42,800 1,289,350
Vastar Resources, Inc. ..................................... 12,000 518,250
YPF Sociedad Anonima ADR.................................... 47,700 1,332,619
------------
16,466,225
------------
MATERIALS -- 45.0%
Metals & Minerals -- 39.4%
Aluminum Co. of America..................................... 16,427 1,224,838
Ashanti Goldfields Co., Ltd. GDR............................ 142,083 1,332,028
Barrick Gold Corp. ......................................... 65,000 1,267,500
Billiton PLC*............................................... 625,700 1,247,450
British Steel PLC ADR....................................... 48,900 715,162
Cleveland-Cliffs, Inc. ..................................... 11,400 459,563
Companhia Vale do Rio Doce ADR.............................. 61,200 772,650
DeBeers Consolidated Mines Ltd. ADR......................... 35,000 446,250
EASCO, Inc. ................................................ 14,500 112,375
Euro Nevada Mining Ltd. .................................... 42,600 696,762
Freeport-McMoRan Copper & Gold, Inc., Class A............... 72,900 706,219
Freeport-McMoRan Copper & Gold, Inc., Class B............... 70,700 737,931
Newmont Mining Corp. ....................................... 48,150 869,709
Normandy Mining Ltd. ....................................... 1,616,910 1,496,130
Phelps Dodge Corp. ......................................... 21,500 1,093,812
Rio Tinto PLC............................................... 69,183 804,587
Stillwater Mining Co.+...................................... 36,750 1,506,750
Paper Products -- 5.6%
Weyerhaeuser Co. ........................................... 22,100 1,122,956
Willamette Industries, Inc. ................................ 32,300 1,082,050
------------
17,694,722
------------
</TABLE>
- ---------------------
36
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE -- 8.0%
Real Estate Investment Trusts -- 8.0%
Archstone Communities Trust................................. 45,500 $ 921,375
CarrAmerica Realty Corp. ................................... 35,300 847,200
Spieker Properties, Inc. ................................... 25,500 882,938
Starwood Hotels & Resorts Trust............................. 21,200 480,975
------------
3,132,488
------------
TOTAL INVESTMENT SECURITIES (cost $43,547,910).............. 37,293,435
------------
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 2.7% AMOUNT
---------------------------------------------------------------------------------------
<S> <C> <C>
Joint Repurchase Agreement Account (See Note 3) (cost
$1,055,000)............................................... $1,055,000 1,055,000
------------
TOTAL INVESTMENTS -- (cost $44,602,910) 97.6% 38,348,435
Other assets less liabilities -- 2.4 950,442
----- ------------
NET ASSETS -- 100.0% $39,298,877
===== ============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
See Notes to Financial Statements
---------------------
37
<PAGE> 39
- ---------------------
ANCHOR SERIES TRUST
MULTI-ASSET PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK -- 61.0% SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
CORE EQUITY -- 61.0%
Aerospace & Military Technology -- 0.7%
Allied Signal, Inc. ........................................ 23,100 $ 1,023,619
Banks -- 4.3%
Citigroup, Inc. ............................................ 59,200 2,930,400
First Union Corp. .......................................... 27,100 1,648,019
State Street Corp. ......................................... 6,500 452,156
U.S. Bancorp................................................ 37,200 1,320,600
Broadcasting & Media -- 3.0%
AirTouch Communications, Inc.+.............................. 10,000 721,250
CBS Corp.+.................................................. 16,500 540,375
Disney (Walt) Co. .......................................... 40,500 1,215,000
Gannett, Inc. .............................................. 30,000 1,935,000
Chemicals -- 1.3%
Dow Chemical Co. ........................................... 9,100 827,531
du Pont (E.I.) de Nemours & Co. ............................ 12,400 657,975
Praxair, Inc. .............................................. 10,800 380,700
Communication Equipment -- 2.0%
Cisco Systems, Inc.+........................................ 22,200 2,060,438
Lucent Technologies, Inc. .................................. 900 99,000
Tellabs, Inc.+.............................................. 10,400 713,050
Computers & Business Equipment -- 3.3%
Compaq Computer Corp. ...................................... 13,600 570,350
International Business Machines Corp. ...................... 12,900 2,383,275
Xerox Corp. ................................................ 16,000 1,888,000
Drugs -- 5.7%
American Home Products Corp. ............................... 37,500 2,111,719
Johnson & Johnson Co. ...................................... 20,400 1,711,050
Merck & Co., Inc. .......................................... 13,000 1,919,937
Pfizer, Inc. ............................................... 11,300 1,417,444
Warner-Lambert Co. ......................................... 15,300 1,150,369
Electrical Equipment -- 2.0%
General Electric Co. ....................................... 29,500 3,010,844
Electronics -- 2.1%
Analog Devices, Inc.+....................................... 36,200 1,135,775
Intel Corp. ................................................ 16,000 1,897,000
Energy Services -- 0.6%
Schlumberger Ltd............................................ 18,800 867,150
Energy Sources -- 3.6%
Anadarko Petroleum Corp. ................................... 23,000 710,125
Chevron Corp. .............................................. 15,000 1,244,062
Conoco, Inc., Class A+...................................... 35,700 745,238
Exxon Corp. ................................................ 26,800 1,959,750
Unocal Corp. ............................................... 21,000 612,938
Entertainment Products -- 0.5%
Eastman Kodak Co. .......................................... 10,300 741,600
</TABLE>
- ---------------------
38
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
CORE EQUITY (continued)
Financial Services -- 3.0%
Associates First Capital Corp., Class A..................... 31,800 $ 1,347,525
Federal National Mortgage Association....................... 18,300 1,354,200
Franklin Resources, Inc. ................................... 10,800 345,600
Merrill Lynch & Co., Inc. .................................. 20,000 1,335,000
Food, Beverage & Tobacco -- 1.0%
Philip Morris Cos., Inc. ................................... 28,800 1,540,800
Forest Products & Paper -- 0.4%
Sealed Air Corp.+........................................... 12,300 628,069
Health Services -- 1.0%
Columbia/HCA Healthcare Corp. .............................. 35,000 866,250
Service Corp. International................................. 15,000 570,937
Household Products -- 3.7%
Estee Lauder Cos., Inc., Class A............................ 14,000 1,197,000
Gillette Co. ............................................... 24,000 1,159,500
Kimberly-Clark Corp. ....................................... 26,400 1,438,800
Procter & Gamble Co. ....................................... 18,000 1,643,625
Insurance -- 2.4%
American International Group, Inc. ......................... 17,750 1,715,094
Marsh & McLennan Cos., Inc. ................................ 30,000 1,753,125
Leisure & Tourism -- 2.0%
AMR Corp.+.................................................. 8,400 498,750
McDonald's Corp. ........................................... 25,700 1,969,262
Southwest Airlines Co. ..................................... 21,000 471,188
Medical Products -- 2.4%
Abbott Laboratories, Inc. .................................. 40,000 1,960,000
Baxter International, Inc. ................................. 16,300 1,048,294
Boston Scientific Corp.+.................................... 21,400 573,787
Metals & Minerals -- 0.6%
Aluminum Co. of America..................................... 11,500 857,469
Retail -- 6.4%
CVS Corp. .................................................. 35,400 1,947,000
Gap, Inc. .................................................. 42,450 2,387,813
Home Depot, Inc. ........................................... 39,400 2,410,787
Wal-Mart Stores, Inc. ...................................... 32,700 2,663,006
Software -- 4.3%
Automatic Data Processing, Inc. ............................ 15,200 1,218,850
Computer Sciences Corp.+.................................... 16,900 1,088,994
First Data Corp. ........................................... 33,200 1,052,025
Microsoft Corp.+............................................ 21,700 3,009,518
Telephone -- 4.1%
Bell Atlantic Corp. ........................................ 19,200 1,017,600
MCI WorldCom, Inc.+......................................... 32,400 2,324,700
SBC Communications, Inc. ................................... 50,000 2,681,250
Transportation -- 0.6%
Union Pacific Corp. ........................................ 19,000 856,187
-------------
TOTAL COMMON STOCK (cost $51,628,353)....................... 89,533,744
-------------
</TABLE>
---------------------
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 33.6% AMOUNT VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
CORE BONDS -- 33.6%
AEROSPACE & MILITARY TECHNOLOGY -- 0.8%
Northrop Grumman Corp. 8.63% 2004........................... $ 1,000,000 $ 1,119,070
ASSET-BACKED SECURITIES -- 1.9%
Aesop Funding II LLC 6.22% 2001*@........................... 1,000,000 1,016,570
Chase Manhattan Auto Owner Trust 5.70% 2001................. 700,000 703,206
Honda Auto Receivables Trust 5.95% 2003..................... 532,907 532,497
IBM Credit Receivables Lease Asset Master 4.55% 2000........ 15,935 15,899
Nissan Auto Recievables Grantor 6.15% 2003.................. 504,683 506,575
CABLE -- 0.7%
TCI Communications, Inc. 6.88% 2006......................... 1,000,000 1,067,070
ENERGY -- 0.9%
Husky Oil Ltd. 7.13% 2006................................... 1,000,000 996,580
Mobil Oil Corp. 9.17% 2000.................................. 245,250 251,357
FINANCE -- 5.1%
Bankers Trust New York Corp. 8.25% 2005..................... 1,000,000 1,109,911
First Financial Caribbean Corp. 7.84% 2006.................. 1,000,000 1,049,370
Fleet Mortgage Group, Inc. 6.50% 2000....................... 1,000,000 1,013,490
General Electric Capital Corp. 6.50% 2006................... 1,000,000 1,069,450
General Motors Acceptance Corp. 5.63% 2001.................. 1,000,000 1,007,150
Lumbermans Mutual Casualty Co. 9.15% 2026*.................. 1,000,000 1,168,380
Security Benefit Life Co. 8.75% 2016*....................... 1,000,000 1,088,740
INDUSTRIAL & COMMERCIAL -- 3.5%
BancTec, Inc. 7.50% 2008.................................... 1,000,000 1,052,550
Clear Channel Communications, Inc. 7.25% 2027............... 1,000,000 1,000,800
Cummins Engine Co., Inc. 6.25% 2003......................... 1,000,000 988,780
Diageo Capital PLC 6.13% 2005............................... 1,000,000 1,032,670
Federal Express Corp. 6.72% 2022(1)......................... 1,000,000 1,039,370
MORTGAGE-RELATED SECURITIES -- 1.6%
CS First Boston Mortgage Securities Corp. 6.40% 2004........ 385,153 392,013
CS First Boston Mortgage Securities Corp. 7.24% 2029........ 1,000,000 1,065,310
Morgan Stanley Capital I, Inc. 6.25% 2007................... 812,052 830,104
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.7%
Quebec Province Canada 8.80% 2003........................... 1,000,000 1,122,130
U.S. GOVERNMENT & AGENCIES -- 16.1%
Federal Home Loan Banks 5.13% 2003.......................... 4,000,000 3,998,760
Federal Home Loan Mortgage Corp. 6.50% 2010-2025............ 4,596,964 4,659,031
Federal National Mortgage Association 6.50% 2028............ 2,957,554 2,976,956
Governmental National Mortgage Association 6.50% 2023....... 3,532,274 3,567,597
United States Treasury Notes 5.63% 2002..................... 4,000,000 4,133,120
United States Treasury Notes 6.13% 2007..................... 4,000,000 4,368,760
UTILITIES -- 2.3%
Niagara Mohawk Power Corp. 5.88% 2002....................... 1,250,000 1,265,512
United States West Capital Funding, Inc. 6.38% 2008......... 1,000,000 1,057,880
Worldcom, Inc. 6.40% 2005................................... 1,000,000 1,036,910
-------------
TOTAL BONDS & NOTES (cost $47,775,523)...................... 49,303,568
-------------
TOTAL INVESTMENT SECURITIES (cost $99,403,876).............. 138,837,312
-------------
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 33.6% AMOUNT VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT -- 0.5%
United States Treasury Bills 4.95% due 3/04/99@ (cost
$768,640)................................................. $ 775,000 $ 769,437
-------------
REPURCHASE AGREEMENT -- 4.7%
-----------------------------------------------------------------------------------------
Joint Repurchase Agreement Account (See Note 3)@ (cost
$6,835,000)............................................... 6,835,000 6,835,000
-------------
TOTAL INVESTMENTS --
(cost $107,007,516) 99.8% 146,441,749
Other assets less liabilities -- 0.2 270,220
----- -------------
NET ASSETS -- 100.0% $146,711,969
===== =============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
(1) Fair valued security; see Note 2
@ The security or a portion thereof represents collateral for the
following open futures contracts:
OPEN FUTURES CONTRACTS
------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION VALUE AT VALUE AS OF APPRECIATION/
CONTRACTS DESCRIPTION DATE TRADE DATE DECEMBER 31, 1998 DEPRECIATION
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
17 Long U.S. Long Bond March 1999 $2,151,182 $2,172,260 $ 21,078
19 Short S&P 500 Index March 1999 5,726,521 5,916,125 (189,604)
-------------
Net Unrealized Depreciation............................................ $(168,526)
=============
</TABLE>
See Notes to Financial Statements
---------------------
41
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- ---------------------
ANCHOR SERIES TRUST
STRATEGIC MULTI-ASSET
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK -- 64.8% SHARES VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL APPRECIATION -- 16.9%
Apparel & Textiles -- 0.1%
Tefron Ltd.+................................................ 7,000 $ 45,937
Broadcasting & Media -- 3.3%
American Tower Corp., Class A+.............................. 10,000 295,625
Clear Channel Communications, Inc.+......................... 1,900 103,550
Crown Castle International Corp.+........................... 10,500 246,750
EchoStar Communications Corp., Class A+..................... 3,400 164,475
Getty Images, Inc.+......................................... 9,500 163,281
Liberty Media Group Inc., Series A+......................... 6,200 285,587
Outdoor Systems, Inc.+...................................... 4,500 135,000
Scripps (E.W) Co., Class A.................................. 2,000 99,500
Univision Communications, Inc., Class A+.................... 3,400 123,038
Business Services -- 1.3%
Comfort Systems USA, Inc.+.................................. 5,000 89,375
Iron Mountain, Inc.+........................................ 3,050 109,991
Pierce Leahy Corp.+......................................... 3,500 89,250
Select Appointments Holdings PLC ADR........................ 9,500 204,250
Service Experts, Inc.+...................................... 5,000 146,250
Communication Equipment -- 1.4%
ADC Telecommunications, Inc.+............................... 3,500 121,625
Alcatel Alsthom ADR......................................... 5,700 139,294
Ascend Communications, Inc.+................................ 3,200 210,400
Gilat Satellite Networks Ltd.+.............................. 2,500 137,812
Nokia Corp., Class A ADR.................................... 700 84,306
Drugs -- 2.4%
Agouron Pharmaceuticals, Inc.+.............................. 3,700 217,375
Genzyme Corp.+.............................................. 7,500 373,125
Gilead Sciences, Inc.+...................................... 2,500 102,656
Human Genome Sciences, Inc.+................................ 2,300 81,794
Pharmacia & Upjohn, Inc. ................................... 2,500 141,562
Zeneca Group PLC ADR........................................ 5,400 242,325
Electrical Equipment -- 0.2%
General Cable Corp.+........................................ 4,250 87,125
Electronics -- 1.1%
Flextronics International Ltd.+............................. 2,500 214,063
Philips Electronics NV-NY Shares ADR........................ 2,000 135,375
Texas Instruments, Inc. .................................... 2,000 171,125
Energy Services -- 0.3%
Santa Fe International Corp. ............................... 4,000 58,500
Transocean Offshore, Inc. .................................. 3,000 80,438
Financial Services -- 0.7%
Heller Financial, Inc., Class A............................. 4,500 132,187
Jefferies Group, Inc. ...................................... 1,600 79,400
Legg Mason, Inc. ........................................... 3,866 122,021
</TABLE>
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL APPRECIATION (continued)
Health Services -- 0.1%
Stewart Enterprises, Inc., Class A.......................... 3,000 $ 66,750
Insurance -- 0.7%
Ace Co., Ltd. ADR........................................... 7,000 241,063
American Bankers Insurance Group, Inc. ..................... 2,000 96,750
Leisure & Tourism -- 0.1%
Papa John's International, Inc.+............................ 1,500 66,188
Medical Products -- 0.2%
Ocular Sciences, Inc.+...................................... 4,000 107,000
Real Estate Companies -- 0.2%
Security Capital Group, Inc., Class B+...................... 5,500 74,594
Retail -- 1.4%
Abercrombie & Fitch Co.+.................................... 2,500 176,875
Bed Bath & Beyond, Inc.+.................................... 10,700 365,137
Hot Topic, Inc.+............................................ 4,100 52,788
Whole Foods Market, Inc.+................................... 2,000 96,750
Software -- 2.9%
BISYS Group, Inc.+.......................................... 3,500 180,687
BMC Software, Inc.+......................................... 1,500 66,844
Computer Sciences Corp.+.................................... 800 51,550
First Data Corp. ........................................... 6,000 190,125
Fundtech Ltd.+.............................................. 6,700 138,187
Mobius Management Systems, Inc.+............................ 4,700 69,912
Policy Management Systems Corp.+............................ 2,000 101,000
Rational Software Corp.+.................................... 5,000 132,500
SPR, Inc.+.................................................. 1,550 26,738
Segue Software, Inc.+....................................... 5,000 101,250
Sterling Software, Inc.+.................................... 6,000 162,375
The Learning Co., Inc.+..................................... 7,700 199,719
Telephone -- 0.3%
Colt Telecom Group PLC+..................................... 6,000 90,713
Intermedia Communications, Inc.+............................ 4,500 77,625
Transportation -- 0.2%
Werner Enterprises, Inc. ................................... 7,500 132,656
------------
8,300,143
------------
CORE EQUITY -- 17.0%
Aerospace & Military Technology -- 1.1%
Allied Signal, Inc. ........................................ 2,700 119,644
United Technologies Corp. .................................. 3,800 413,250
Automotive -- 0.8%
Ford Motor Co. ............................................. 3,400 199,538
General Motors Corp. ....................................... 2,900 207,531
Banks -- 0.3%
Citigroup, Inc. ............................................ 2,500 123,750
Broadcasting & Media -- 0.8%
Gannett, Inc. .............................................. 4,250 274,125
Sprint PCS Group............................................ 4,600 106,375
Communication Equipment -- 0.6%
Cisco Systems, Inc.+........................................ 3,150 292,359
Computers & Business Equipment -- 1.3%
Compaq Computer Corp. ...................................... 5,500 230,656
</TABLE>
---------------------
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
CORE EQUITY (continued)
Computers & Business Equipment (continued)
International Business Machines Corp. ...................... 2,200 $ 406,450
Drugs -- 0.7%
American Home Products Corp. ............................... 6,100 343,506
Electronics -- 0.7%
Intel Corp. ................................................ 2,700 320,119
Entertainment Products -- 0.5%
Eastman Kodak Co. .......................................... 3,800 273,600
Financial Services -- 1.4%
CIT Group, Inc., Class A.................................... 10,000 318,125
Federal National Mortgage Association....................... 5,300 392,200
Food, Beverage & Tobacco -- 0.8%
Philip Morris Cos., Inc. ................................... 7,300 390,550
Health Services -- 0.2%
Columbia/HCA Healthcare Corp. .............................. 4,900 121,275
Household Products -- 0.9%
Kimberly-Clark Corp. ....................................... 1,500 81,750
Procter & Gamble Co. ....................................... 3,900 356,119
Insurance -- 0.6%
Marsh & McLennan Cos., Inc. ................................ 5,250 306,797
Medical Products -- 0.7%
Abbott Laboratories, Inc. .................................. 5,400 264,600
Boston Scientific Corp.+.................................... 2,600 69,713
Metals & Minerals -- 0.3%
Aluminum Co. of America..................................... 2,200 164,038
Retail -- 2.0%
Dollar General Corp. ....................................... 4,600 108,675
Gap, Inc. .................................................. 8,100 455,625
Wal-Mart Stores, Inc. ...................................... 5,000 407,187
Software -- 0.7%
Microsoft Corp.+............................................ 2,500 346,719
Telephone -- 2.6%
Ameritech Corp. ............................................ 6,500 411,937
BellSouth Corp. ............................................ 9,400 468,825
SBC Communications, Inc. ................................... 7,600 407,550
------------
8,382,588
------------
GLOBAL CORE EQUITY -- 30.9%
AUSTRALIA -- 1.5%
Australia & New Zealand Banking Group Ltd. (Finance)........ 38,000 248,692
Cable & Wireless Optus (Utilities)+*........................ 44,800 94,162
Pasminco Ltd. (Materials)................................... 104,334 79,278
Rio Tinto, Ltd. (Materials)................................. 14,551 172,581
Western Mining Corp., Ltd. (Materials)...................... 52,291 157,652
BRAZIL -- 0.1%
Embratel Participacoes SA ADR (Utilities)................... 2,600 36,237
Telesp Celular Participacoes SA ADR (Information &
Entertainment)+........................................... 1,600 28,000
CHINA -- 0.2%
China Telecom (Hong Kong) Ltd. (Information &
Entertainment)+........................................... 67,900 117,438
</TABLE>
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
GLOBAL CORE EQUITY (continued)
DENMARK -- 0.6%
Unidanmark A/S, Class A (Finance)........................... 3,290 $ 297,244
FINLAND -- 0.7%
Nokia AB Oy, Series A (Information Technology).............. 2,740 333,163
FRANCE -- 5.5%
Alcatel Alsthom, Inc. (Information Technology).............. 2,540 310,742
AXA SA de CV (Finance)...................................... 1,190 172,402
Banque Nationale de Paris (Finance)......................... 6,019 495,429
Compagnie de St. Gobain (Materials)......................... 510 71,971
Compagnie Financiere de Paribas SA (Finance)................ 3,970 344,881
Establissements Economiques du Casino Guichard-Perrachon SA
(Consumer Discretionary).................................. 1,170 121,792
Renault SA (Consumer Discretionary)......................... 1,580 70,932
STMicroelectronics NV (Information Technology)+............. 2,000 156,125
Suez Lyonnaise des Eaux (Utilities)......................... 1,130 232,023
Total SA, Class B (Energy).................................. 2,162 218,868
Vivendi SA (Utilities)...................................... 1,840 477,196
GERMANY -- 2.1%
Hoechst AG (Healthcare)..................................... 5,880 243,795
Karstadt AG (Consumer Discretionary)........................ 430 224,469
Mannesmann AG (Information Technology)...................... 2,680 307,140
Siemens AG (Industrial & Commercial)........................ 3,960 255,430
GREECE -- 0.1%
Panafon Hellenic Telecom SA (Information Technology)+*...... 2,100 56,274
HONG KONG -- 0.3%
Cheung Kong Holdings Ltd. (Industrial & Commercial)......... 23,000 165,503
IRELAND -- 0.8%
Allied Irish Banks PLC (Finance)............................ 21,486 382,671
ITALY -- 0.7%
Telecom Italia SpA (Utilities).............................. 40,500 345,369
JAPAN -- 3.6%
Advantest Corp. (Information Technology).................... 2,100 133,003
Eisai Co., Ltd. (Healthcare)................................ 9,000 175,144
Fuji Bank Ltd. (Finance).................................... 46,000 169,270
Mabuchi Motor Co., Ltd. (Industrial & Commercial)........... 1,300 99,469
Matsumotokiyoshi (Consumer Discretionary)................... 3,900 150,756
Nichiei Co., Ltd. (Finance)................................. 600 47,766
Olympus Optical Co. (Healthcare)............................ 21,000 241,300
Rohm Co. Ltd. (Information Technology)...................... 2,000 182,044
Sanwa Bank Ltd. (Finance)................................... 10,000 77,046
Sony Corp. (Information & Entertainment).................... 3,000 218,399
Takefuji Corp. (Finance).................................... 300 21,893
Toshiba Corp. (Information Technology)...................... 43,000 255,984
NETHERLANDS -- 2.1%
AEGON NV (Finance).......................................... 1,400 171,842
Gucci Group NV NY Registry Shares (Consumer
Discretionary)............................................ 1,900 92,387
Philips Electronics NV (Information Technology)............. 2,000 134,135
Royal Dutch Petroleum Co. (Energy).......................... 1,900 94,560
TNT Post Group NV (Industrial & Commercial)................. 4,700 151,355
Unilever NV (Consumer Staples).............................. 4,600 392,985
SOUTH AFRICA -- 0.1%
De Beers Centenary AG (Materials)........................... 2,400 30,559
</TABLE>
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45
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
GLOBAL CORE EQUITY (continued)
SOUTH KOREA -- 0.1%
Korea Telecommunications Corp. (Utilities).................. 100 $ 3,159
Pohang Iron & Steel Co., Ltd. ADR (Materials)............... 4,000 67,500
SPAIN -- 1.1%
Banco de Santander SA (Finance)............................. 9,200 182,550
Endesa SA (Utilities)....................................... 7,650 202,392
Telefonica SA (Utilities)................................... 3,800 168,717
SWEDEN -- 1.8%
Hennes & Mauritz AB, Class B (Consumer Discretionary)....... 4,300 350,359
Nordbanken AB (Finance)..................................... 34,860 223,110
Pharmacia & Upjohn, Inc. (Healthcare)....................... 5,290 295,596
SWITZERLAND -- 1.1%
Holderbank Financiere Glarus AG (Materials)................. 170 201,223
Roche Holdings AG (Healthcare).............................. 10 122,006
Swisscom AG (Utilities)..................................... 560 234,404
TAIWAN -- 0.5%
Taiwan Semiconductor Manufacturing Co., Ltd. ADR
(Information Technology)+................................. 15,660 222,176
UNITED KINGDOM -- 7.9%
Allied Domecq PLC (Consumer Staples)........................ 12,000 110,949
Bank of Scotland (Finance).................................. 15,745 188,344
Billiton PLC (Materials).................................... 4,200 8,373
BOC Group PLC (Materials)................................... 10,300 147,681
British America Tobacco PLC (Consumer Staples).............. 21,500 189,317
British Petroleum Co. PLC (Energy).......................... 15,954 237,494
British Telecommunications PLC (Utilities).................. 7,700 116,542
Cable & Wireless Communication PLC (Utilities)+............. 9,700 88,475
Compass Group PLC (Information & Entertainment)............. 30,700 350,406
Glaxo Wellcome PLC (Healthcare)............................. 7,200 247,855
HSBC Holdings PLC (Finance)................................. 4,800 119,573
National Westminster Bank PLC (Finance)..................... 18,800 363,881
Next PLC (Consumer Discretionary)........................... 33,400 273,570
Powergen PLC (Utilities).................................... 1,900 24,938
Rentokil Initial PLC (Industrial & Commercial).............. 19,900 150,432
Scottish Power PLC (Utilities).............................. 19,800 203,954
SmithKline Beecham PLC (Healthcare)......................... 24,427 338,541
Standard Chartered PLC (Finance)............................ 18,800 218,016
Vodafone Group PLC (Information & Entertainment)............ 25,400 412,713
Zeneca Group PLC (Healthcare)............................... 2,600 113,261
------------
15,234,863
------------
TOTAL COMMON STOCK (cost $25,744,029)....................... 31,917,594
------------
PREFERRED STOCK -- 0.1%
--------------------------------------------------------------------------------------------
BRAZIL -- 0.1%
Telesp Participacoes (Utilities) (cost $46,644)............. 1,600,000 36,415
------------
PRINCIPAL
BONDS & NOTES -- 29.4% AMOUNT VALUE
--------------------------------------------------------------------------------------------
CORE BONDS -- 17.8%
ASSET-BACKED SECURITIES -- 0.4%
Daimler Benz Vehicle Owner Trust 5.23% 2001................. $ 65,000 64,924
World Omni Automobile Lease Trust 6.18% 2003................ 114,936 115,547
</TABLE>
- ---------------------
46
<PAGE> 48
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
CORE BONDS (continued)
AUTOMOTIVE -- 0.4%
Accuride Corp., 9.25% 2008.................................. $ 65,000 $ 66,137
Johnstown America Industries, Inc., Series C 11.75% 2005.... 85,000 89,463
LDM Technologies, Inc., Series B 10.75% 2007................ 35,000 34,300
CHEMICALS -- 0.4%
ARCO Chemical Co. 9.80% 2020................................ 35,000 35,020
Laroche Indusrties, Inc., Series B 9.50% 2007............... 100,000 80,000
Pioneer Americas Acquisition Corp., Series B 9.25% 2007..... 25,000 19,437
Sovereign Specialty Chemicals, Series B 9.50% 2007.......... 50,000 49,750
COMMUNICATIONS & MEDIA -- 1.6%
Allbritton Communications Co., Series B 9.75% 2007.......... 50,000 52,750
AMC Entertainment, Inc...................................... 50,000 51,000
Big Flowers Press Holdings, Inc. 8.63% 2008*................ 35,000 35,044
Century Communications Corp., zero coupon 2008+............. 150,000 76,875
Classic Cable, Inc. 9.88% 2008*............................. 45,000 46,800
Echostar Satellite Broadcasting Corp. zero coupon
2004+(2).................................................. 75,000 74,812
Falcon Holding Group LP 8.38% 2010.......................... 50,000 50,250
Fox/Liberty Networks LLC zero coupon 2007+(2)............... 100,000 68,000
Frontiervision Holdings LP zero coupon 2007+(2)............. 35,000 29,225
Granite Broadcasting Corp. 2008............................. 15,000 14,250
Lin Holdings Corp. zero coupon 2008+(2)..................... 100,000 69,000
Loews Cineplex Entertainment Corp. 8.88% 2008............... 60,000 61,650
MCI Communications Corp. 7.13% 2000......................... 90,000 91,502
NTL, Inc. zero coupon 2008+*(2)............................. 75,000 47,344
Sullivan Graphics, Inc. 12.75% 2005......................... 45,000 45,675
CONSUMER DISCRETIONARY -- 0.8%
Allied Waste North America 7.63% 2006*...................... 45,000 45,337
Duane Reade, Inc. 9.25% 2008................................ 70,000 72,100
Galey & Lord, Inc. 9.13% 2008............................... 50,000 43,500
Revlon Worldwide Corp., Series B zero coupon 2001+.......... 175,000 100,625
True Temper Sports, Inc. 10.88% 2008*....................... 60,000 60,450
Unicco Service Co./Unicco Finance Corp., Series B 9.88%
2007...................................................... 100,000 97,625
ENERGY -- 1.5%
Abraxas Petroleum Corp. 11.50% 2004......................... 50,000 38,000
Costilla Energy, Inc. 10.25% 2006........................... 130,000 91,975
Dailey International, Inc. 9.50% 2008....................... 150,000 69,000
P&L Coal Holdings Corp. 9.63% 2008.......................... 250,000 253,750
Phillips Petroleum Co. 9.18% 2021........................... 250,000 279,395
FINANCE -- 0.7%
AMRESCO, Inc. 9.88% 2005.................................... 50,000 35,000
Associates Corp. of North America 5.75% 2003................ 75,000 75,673
ContiFinancial Corp. 8.13% 2008............................. 50,000 35,000
Resource America, Inc. 12.00% 2004.......................... 85,000 69,912
Western Financial Savings Bank 8.88% 2007................... 150,000 112,500
FOOD & LODGING -- 0.3%
Aurora Foods, Inc., Series D 9.88% 2007..................... 25,000 27,187
Aurora Foods, Inc., Series E 8.75% 2008..................... 35,000 36,444
Delaware Monte Foods Co., Series B zero coupon 2007(2)...... 100,000 69,875
</TABLE>
---------------------
47
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
CORE BONDS (continued)
GAMING -- 0.4%
Argosy Gaming Co. 13.25% 2004............................... $ 120,000 $ 134,550
Fitzgeralds Gaming Corp., Series B 12.25% 2004.............. 25,000 13,500
Station Casinos, Inc. 8.88% 2008*........................... 50,000 50,250
HEALTHCARE -- 0.3%
Owens & Minor, Inc. 10.88% 2006............................. 75,000 80,344
Universal Hospital Services, Inc. 10.25% 2008............... 100,000 87,875
HOUSING -- 0.1%
Engle Homes, Inc., Series B 9.25% 2008...................... 45,000 45,000
INDUSTRIAL & COMMERCIAL -- 0.9%
K & F Industries, Inc. Series B 9.25% 2007.................. 180,000 181,800
MTL, Inc. 10.00% 2006*...................................... 100,000 96,750
Moog, Inc. Series B 10.00% 2006............................. 70,000 71,750
Neenah Corp. Series E 11.13% 2007*.......................... 20,000 20,650
WESCO Distribution, Inc. 9.13% 2008......................... 70,000 70,962
INFORMATION TECHNOLOGY -- 0.5%
Advanced Micro Devices, Inc. 11.00% 2003.................... 100,000 106,000
DecisionOne Holdings Corp. zero coupon 2008+(2)............. 150,000 31,500
Fisher Scientific International, Inc. 9.00% 2008............ 50,000 49,500
Verio, Inc. 11.25% 2008*.................................... 50,000 50,375
MATERIALS -- 0.6%
A.K. Steel Corp. 9.13% 2006................................. 95,000 99,513
Armco, Inc. 8.88% 2008*..................................... 50,000 50,375
Bayou Steel Corp. 9.50% 2008................................ 105,000 98,700
Falcon Building Products, Inc. Series B zero coupon
2007(2)................................................... 50,000 28,750
MULTI-INDUSTRY -- 0.1%
Grove Worldwide LLC 9.25% 2008.............................. 50,000 45,000
MUNICIPAL BONDS -- 0.2%
Austin Texas Rental Car Special Facility Revenue 6.13%
2007...................................................... 50,000 51,291
Worcester MA 5.50% 2007..................................... 50,000 49,208
PAPER PRODUCTS -- 0.8%
American Pad & Paper Co. Series B 13.00% 2005............... 135,000 77,625
Gaylord Container Corp. 9.38% 2007.......................... 100,000 85,000
Silgan Holdings Corp. 9.00% 2009............................ 250,000 253,125
</TABLE>
- ---------------------
48
<PAGE> 50
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(DENOMINATED IN
BONDS & NOTES (CONTINUED) LOCAL CURRENCY) VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORE BONDS (continued)
TELECOMMUNICATIONS -- 3.5%
BTI Telecom Corp. 10.50% 2007............................... $ 175,000 $ 132,125
Concentric Network Corp. 12.75% 2007........................ 50,000 50,375
ESpire Communications Inc. zero coupon 2008+(2)............. 150,000 60,000
GCI, Inc. 9.75% 2007........................................ 100,000 99,000
GST Telecommunications, Inc. 12.75% 2007+................... 60,000 57,150
GST Network Funding, Inc. zero coupon 2008+(2).............. 105,000 46,200
Globalstar LP 10.75% 2004................................... 75,000 54,000
ITC DeltaCom, Inc. 9.75% 2008*.............................. 25,000 25,750
IXC Communications, Inc. 9.00% 2008......................... 75,000 75,563
Intermedia Communications, Inc. Series B 8.88% 2007......... 185,000 178,525
Iridium LLC, Series D 10.88% 2005........................... 20,000 16,525
Iridium LLC 11.25% 2005..................................... 50,000 42,750
KMC Telecom Holdings, Inc. zero coupon 2008+(2)............. 330,000 158,812
Level 3 Communications, Inc. 9.13% 2008..................... 110,000 109,037
MGC Communications, Inc. 13.00% 2004........................ 25,000 16,250
Nextel Communications, Inc. zero coupon 2007+(2)............ 375,000 228,750
PSINet, Inc. 10.00% 2005.................................... 125,000 122,500
PSINet, Inc. 11.50% 2008*................................... 25,000 25,938
RSL Communications PLC 12.00% 2008*......................... 40,000 42,800
Telecommunications Techniques 9.75% 2008.................... 140,000 135,975
Time Warner Telecom, Inc. 9.75% 2008........................ 55,000 57,475
U.S. GOVERNMENT & AGENCIES -- 4.1%
Federal Home Loan Mortgage Corp. 5.13% 2008................. 220,000 217,903
Federal National Mortgage Association 1.75% 2008............ JPY 40,000,000 345,688
Federal National Mortgage Association 6.00% 2099............ 30,000 30,075
Federal National Mortgage Association 6.38% 2007............ AUD 65,000 41,592
Federal National Mortgage Association 6.45% 2008............ 49,544 52,011
Government National Mortgage Association 6.00% 2009......... 125,611 127,141
Government National Mortgage Association 7.50% 2027......... 136,412 140,632
United States Treasury Bonds 6.25% 2023..................... 100,000 111,766
United States Treasury Notes 6.50% 2006..................... 500,000 554,610
United States Treasury Notes 6.63% 2007..................... 270,000 303,623
United States Treasury Notes 7.88% 2004..................... 100,000 115,859
UTILITIES -- 0.2%
United States West Capital Funding, Inc. 6.38% 2008......... 100,000 105,788
------------
8,793,684
------------
GLOBAL CORE BONDS -- 11.6%
ARGENTINA -- 0.2%
Acindar Industria Argentina de Aceros SA 11.25% 2004........ 55,000 44,000
Disco SA 9.88% 2008......................................... 70,000 59,150
BRAZIL -- 0.3%
Aracruz Celulose SA 10.38% 2002*............................ 100,000 86,000
CSN Iron SA 9.13% 2007*..................................... 100,000 61,000
Companhia Vale do Rio Doce zero coupon 1999+(1)............. 2,000 0
CANADA -- 2.4%
British Columbia Province Canada 6.50% 2026................. 150,000 157,033
Government of Canada 7.25% 2003............................. CAD 170,000 121,910
Government of Canada 7.50% 2001............................. CAD 860,000 592,790
Government of Canada 8.50% 2002............................. CAD 245,000 177,828
Microcell Telecommunications, Series B zero coupon
2007(2)................................................... CAD 160,000 57,573
Repap New Brunswick, Inc. 9.00% 2004........................ 60,000 54,000
</TABLE>
---------------------
49
<PAGE> 51
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(DENOMINATED IN
BONDS & NOTES (CONTINUED) LOCAL CURRENCY) VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
GLOBAL CORE BONDS (continued)
CHILE -- 0.4%
Compania de Telecomunicaciones 7.63% 2006................... $ 100,000 $ 95,328
Santiago Air SA 6.95% 2012*................................. 100,000 99,144
COLOMBIA -- 0.2%
Republic of Colombia 9.75% 2008............................. GBP 65,000 83,039
DENMARK -- 2.6%
Kingdom of Denmark 7.00% 2024............................... DKK 1,000,000 201,122
Kingdom of Denmark 9.00% 2000............................... DKK 6,400,000 1,095,109
FRANCE -- 0.8%
Caisse D'Amortissement Dela Sociale 6.25% 2008.............. GBP 220,000 382,797
GERMANY -- 2.7%
Federal Republic of Germany 6.00% 2007...................... DEM 650,000 445,710
Federal Republic of Germany 6.25% 2024...................... DEM 750,000 546,547
Federal Republic of Germany 6.50% 2027...................... DEM 50,000 37,637
Federal Republic of Germany 6.88% 2005...................... DEM 210,000 148,509
Kreditanst Fuer Wieder 5.00% 2009........................... DEM 250,000 160,391
INDONESIA -- 0.1%
Pindo Deli Finance Mauritius Ltd. 10.75% 2007............... 100,000 53,250
ITALY -- 0.3%
Republic of Italy 6.00% 2007................................ ITL 150,000,000 103,556
Republic of Italy 6.50% 2027................................ ITL 70,000,000 52,899
JAPAN -- 0.7%
Government of Japan 4.10% 2003.............................. JPY 11,000,000 110,048
Nippon Telegraph & Telephone Corp. 2.50% 2007............... JPY 25,000,000 225,426
MEXICO -- 0.5%
Petroleos Mexicanos 8.85% 2007.............................. 250,000 225,625
SUPRANATIONALS -- 0.3%
Euro Investment Bank 7.63% 2006............................. 90,000 173,077
SWEDEN -- 0.1%
Kingdom of Sweden 6.75% 2014................................ SEK 400,000 61,360
UNITED KINGDOM -- 0.0%
United Kingdom Treasury 7.75% 2006.......................... GBP 5,000 10,043
------------
5,721,901
------------
TOTAL BONDS & NOTES (cost $14,811,977)...................... 14,515,585
------------
<CAPTION>
RIGHTS -- 0.0%+ SHARES
---------------------------------------------------------------------------------------------
<S> <C> <C>
SPAIN
Telefonica SA 1/30/99 (Utilities)
(cost $0)................................................. 3,800 3,369
------------
WARRANTS -- 0.0%+
---------------------------------------------------------------------------------------------
KMC Telecom Holdings, Inc. 4/15/08 (Telecommunications)(1)
(cost $912)............................................... 330 825
------------
TOTAL INVESTMENT SECURITIES (cost $40,603,562).............. 46,473,788
------------
</TABLE>
- ---------------------
50
<PAGE> 52
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 2.1% AMOUNT VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 0.8%
National Rural Utilities Cooperative Finance Corp. 5.06% due
3/26/99................................................... $ 200,000 $ 198,363
Park Avenue Recreation Corp. 5.50% due 2/12/99 200,000 198,717
------------
TOTAL CORPORATE SHORT-TERM NOTES (cost $396,355)............ 397,080
------------
U.S. GOVERNMENT -- 1.3%
United States Treasury Bills 4.95% due 3/4/99 (cost
$619,871)@................................................ 625,000 620,513
------------
TOTAL SHORT-TERM SECURITIES (cost $1,016,226)............... 1,017,593
------------
REPURCHASE AGREEMENT -- 3.5%
---------------------------------------------------------------------------------------------
Joint Repurchase Agreement Account (See Note 3)@ (cost
$1,735,000)............................................... 1,735,000 1,735,000
------------
TOTAL INVESTMENTS --
(cost $43,354,788) 99.9% 49,226,381
Other assets less liabilities -- 0.1 27,848
----- ------------
NET ASSETS -- 100.0% $49,254,229
===== ============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified buyers
ADR -- American Depository Receipts
(1) Fair valued security, see Note 2
(2) Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
@ The security or a portion thereof represents collateral for the
following open future contracts:
OPEN FUTURES CONTRACTS
------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION VALUE AT VALUE AS OF APPRECIATION/
CONTRACTS DESCRIPTION DATE TRADE DATE DECEMBER 31, 1998 DEPRECIATION
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
29 Short Marche A Terme International March 1999 $1,004,140 $1,023,608 $(19,468)
de France -- CAC 40 Stock
Index Future
2 Short Topix Index Future -- Tokyo March 1999 200,091 190,782 9,309
Stock Exchange
8 Long Toronto 35 Index Future -- March 1999 891,828 925,781 33,953
Toronto Futures Exchange
-------------
Net Unrealized Appreciation..................................................... $ 23,794
=============
</TABLE>
---------------------
51
<PAGE> 53
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACT IN DELIVERY GROSS UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
--------------------------------------------------------------
<S> <C> <C> <C>
*AUD 210,000 USD 135,517 1/29/99 $ 6,794
USD 131,818 CAD 203,000 1/29/99 999
*USD 1,371,544 CHF 1,900,000 1/8/99 12,767
USD 102,180 CHF 140,000 2/10/99 175
CHF 327,000 USD 241,004 2/10/99 1,930
CHF 177,000 USD 134,193 2/10/99 4,786
USD 1,195,936 DEM 2,000,000 1/8/99 4,574
*USD 80,247 DEM 135,000 1/13/99 807
DEM 780,000 USD 481,511 1/22/99 12,997
USD 464,706 DEM 790,000 1/28/99 9,952
USD 91,340 DEM 154,000 1/29/99 1,192
*USD 29,864 DEM 50,000 1/29/99 179
DEM 1,578,000 USD 953,837 1/29/99 5,677
DEM 214,000 USD 129,512 1/29/99 927
DEM 50,000 USD 30,388 1/29/99 345
DEM 217,000 USD 131,031 2/8/99 577
USD 240,000 DEM 400,000 2/10/99 492
*USD 258,747 DEM 440,000 2/18/99 5,903
*DKK 7,375,000 USD 1,172,496 1/29/99 12,785
DKK 874,000 USD 138,466 1/29/99 1,031
GBP 630,000 USD 1,067,976 1/8/99 21,567
USD 127,666 GBP 77,000 1/29/99 140
GBP 4,000 USD 6,656 1/29/99 17
*USD 164,035 ITL 274,210,000 1/7/99 1,862
*ITL 14,380,000 USD 8,829 1/29/99 120
*USD 424,566 JPY 49,111,638 1/13/99 10,609
*USD 191,332 JPY 22,419,000 1/13/99 7,321
*USD 14,668 JPY 1,755,000 1/29/99 915
*USD 24,252 JPY 2,800,000 1/29/99 612
*USD 364,299 JPY 42,000,000 3/3/99 10,288
*USD 472,375 JPY 55,000,000 3/3/99 18,156
*SEK 5,868,000 USD 747,554 1/8/99 25,071
*SEK 2,756,000 USD 359,228 1/29/99 19,594
----------
201,161
==========
</TABLE>
- ---------------------
52
<PAGE> 54
OPEN FORWARD FOREIGN CURRENCY CONTRACTS (CONTINUED)
------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACT IN DELIVERY GROSS UNREALIZED
TO DELIVER EXCHANGE FOR DATE DEPRECIATION
--------------------------------------------------------------
<S> <C> <C> <C>
*USD 90,376 AUD 145,000 1/29/99 $ (1,496)
USD 582,049 CAD 880,000 1/8/99 (6,312)
*CAD 1,304,000 USD 843,707 1/29/99 (9,466)
*CAD 271,000 USD 175,405 1/29/99 (1,904)
USD 319,149 CAD 480,000 2/4/99 (5,093)
CAD 480,000 USD 310,188 2/4/99 (3,868)
CAD 78,000 USD 50,551 2/16/99 (484)
*CHF 1,900,000 USD 1,378,960 1/8/99 (5,351)
*USD 84,957 DEM 140,000 1/13/99 (901)
DEM 260,000 USD 154,163 1/29/99 (2,061)
*DEM 41,000 USD 24,084 1/29/99 (552)
DEM 245,000 USD 144,202 1/29/99 (3,009)
DEM 36,000 USD 21,566 1/29/99 (65)
*DEM 433,000 USD 259,655 2/8/99 (651)
USD 133,901 DEM 220,000 2/10/99 (1,631)
DEM 170,000 USD 101,675 2/10/99 (534)
*USD 259,358 DKK 1,646,000 2/8/99 (454)
USD 130,827 DKK 826,000 2/8/99 (904)
FRF 5,885,000 USD 1,049,211 1/8/99 (3,778)
GBP 278,000 USD 460,574 1/29/99 (869)
USD 39,912 GBP 24,000 1/29/99 (77)
GBP 483,000 USD 799,027 1/29/99 (2,662)
*ITL 500,923,000 USD 281,750 1/7/99 (21,308)
*ITL 20,450,000 USD 11,487 1/7/99 (885)
*JPY 36,451,000 USD 302,322 1/13/99 (20,667)
*JPY 12,660,638 USD 110,121 1/13/99 (2,064)
*JPY 22,419,000 USD 196,477 1/13/99 (2,176)
*JPY 9,500,000 USD 83,752 1/13/99 (427)
*JPY 9,608,000 USD 80,662 1/13/99 (4,474)
*JPY 70,457,000 USD 601,682 1/29/99 (23,963)
*JPY 31,221,000 USD 258,025 2/18/99 (19,944)
*JPY 97,000,000 USD 846,415 3/3/99 (18,702)
USD 480,787 SEK 3,736,000 1/22/99 (20,522)
*USD 160,407 SEK 1,253,000 1/29/99 (5,994)
*USD 134,123 SEK 1,044,000 1/29/99 (5,466)
----------
(198,714)
----------
Net Unrealized Appreciation............ $ 2,447
==========
</TABLE>
-----------------------------
* Represents open forward foreign currency contracts and
offsetting or partially offsetting open forward foreign currency
contracts that do not have additional market risk but have
continued counterparty settlement risk.
<TABLE>
<S> <C> <C>
AUD -- Australian
Dollar DKK -- Danish Krone JPY -- Japanese Yen
CAD -- Canadian Dollar FRF -- French Franc SEK -- Swedish Krona
CHF -- Swiss Franc GBP -- Pound Sterling USD -- United States Dollar
DEM -- Deutsche Mark ITL -- Italian Lira
</TABLE>
See Notes to Financial Statements
---------------------
53
<PAGE> 55
- ---------------------
ANCHOR SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GOVERNMENT &
MONEY MARKET FIXED INCOME QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value*............................ $ -- $16,990,815 $369,061,395 $24,199,782
Short-term securities*...................................... 65,604,895 -- -- --
Repurchase agreements (cost equals market).................. -- 115,000 11,965,000 1,495,000
Cash........................................................ 3,652 4,421 1,474 1,969
Foreign currency............................................ -- -- -- --
Receivables for --
Fund shares sold.......................................... 965,995 115 2,932,366 15,448
Dividends and accrued interest............................ 374,379 339,502 4,384,013 591,014
Sales of investments...................................... -- -- 10,053,125 94,793
Variation margin on futures contracts..................... -- -- -- --
Foreign currency contracts................................ -- -- -- --
Prepaid expenses............................................ 18,048 8,250 43,173 8,609
Unrealized appreciation on forward foreign currency
contracts................................................. -- -- -- --
--------------------------------------------------------
66,966,969 17,458,103 398,440,546 26,406,615
--------------------------------------------------------
LIABILITIES:
Payables for --
Purchases of investments.................................. -- 4,930 20,148,970 210,981
Fund shares redeemed...................................... 1,370,232 8,658 2,340,614 49,233
Management fees........................................... 27,547 9,305 197,710 16,251
Foreign currency contracts................................ -- -- -- --
Variation margin on futures contracts..................... -- -- -- --
Other accrued expenses...................................... 15,877 4,874 85,877 31,389
Unrealized depreciation on forward foreign currency
contracts................................................. -- -- -- --
--------------------------------------------------------
1,413,656 27,767 22,773,171 307,854
--------------------------------------------------------
NET ASSETS:................................................. $65,553,313 $17,430,336 $375,667,375 $26,098,761
========================================================
Shares of beneficial interest outstanding (unlimited shares
authorized)............................................... 65,553,313 1,320,394 25,668,435 3,839,735
Net asset value per share................................... $ 1.00 $ 13.20 $ 14.64 $ 6.80
========================================================
COMPOSITION OF NET ASSETS:
Capital paid in............................................. $65,553,313 $17,019,400 $344,989,706 $32,337,242
Accumulated undistributed net investment income (loss)...... (1,211) 1,148,173 16,374,488 2,844,811
Accumulated undistributed net realized gain (loss) on
investments, futures contracts and foreign currency....... 1,211 (1,089,707) 6,857,256 (5,711,090)
Unrealized appreciation (depreciation) of investments....... -- 352,470 7,445,925 (3,372,202)
Unrealized foreign exchange gain (loss) on other assets and
liabilities............................................... -- -- -- --
Unrealized appreciation (depreciation) on futures
contracts................................................. -- -- -- --
--------------------------------------------------------
$65,553,313 $17,430,336 $375,667,375 $26,098,761
========================================================
---------------
*Cost
Investment securities...................................... $ -- $16,638,345 $361,615,470 $27,571,984
========================================================
Short-term securities...................................... $65,604,895 $ -- $ -- $ --
========================================================
</TABLE>
See Notes to Financial Statements
- ---------------------
54
<PAGE> 56
- ---------------------
<TABLE>
<CAPTION>
GROWTH AND FOREIGN CAPITAL NATURAL STRATEGIC
INCOME SECURITIES GROWTH APPRECIATION RESOURCES MULTI-ASSET MULTI-ASSET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$50,730,828... $28,566,955 $652,623,113 $1,047,526,076 $37,293,435 $138,837,312 $46,473,788
-- ....... 124,834 -- -- -- 769,437 1,017,593
1,445,000.. 1,015,000 19,260,000 49,680,000 1,055,000 6,835,000 1,735,000
2,665..... 696 235 1,424 2,987 4,560 3,174
-- ....... 94 -- 292 -- -- 116
53,171.... 1,475 1,189,002 4,053,143 1,105,144 19,122 22,370
55,286.... 79,008 438,506 295,243 96,253 697,246 354,450
-- ....... -- 59,234 3,089,172 264,667 -- 19,387
-- ....... -- -- -- -- -- 12,335
-- ....... -- -- -- 371,733 -- --
3,473..... 3,523 42,481 19,336 2,118 27,833 13,330
-- ....... -- -- -- -- -- 201,161
---------------------------------------------------------------------------------------------------
52,290,423... 29,791,585 673,612,571 1,104,664,686 40,191,337 147,190,510 49,852,704
---------------------------------------------------------------------------------------------------
-- ....... -- 2,135,846 915,411 371,733 -- 258,478
63,289.... 48,586 1,671,705 2,373,723 102,313 259,158 33,663
29,817.... -- 372,990 547,045 24,232 123,300 41,026
-- ....... -- -- -- 376,923 -- --
-- ....... -- -- -- -- 18,275 --
7,678..... 11,077 102,189 182,577 17,259 77,808 66,594
-- ....... 30,700 -- -- -- -- 198,714
---------------------------------------------------------------------------------------------------
100,784... 90,363 4,282,730 4,018,756 892,460 478,541 598,475
---------------------------------------------------------------------------------------------------
$52,189,639... $29,701,222 $669,329,841 $1,100,645,930 $39,298,877 $146,711,969 $49,254,229
====================================================================================================
2,472,683.. 2,779,515 20,581,369 30,922,008 3,391,502 10,876,228 4,706,707
$21.11..... $ 10.69 $ 32.52 $ 35.59 $ 11.59 $ 13.49 $ 10.46
====================================================================================================
$28,239,116... $27,810,118 $367,299,368 $ 731,296,201 $48,984,806 $ 84,823,973 $34,330,285
314,011... 38,059 2,119,618 884,964 651,667 3,123,018 1,023,157
6,782,303.. (1,967,982) 46,480,798 49,624,778 (4,083,132) 19,499,271 7,996,408
16,854,209... 3,849,320 253,430,057 318,844,094 (6,254,475) 39,434,233 5,871,593
-- ....... (28,293) -- (4,107) 11 -- 8,992
-- ....... -- -- -- -- (168,526) 23,794
---------------------------------------------------------------------------------------------------
$52,189,639... $29,701,222 $669,329,841 $1,100,645,930 $39,298,877 $146,711,969 $49,254,229
====================================================================================================
$33,876,619... $24,717,635 $399,193,056 $ 728,681,982 $43,547,910 $ 99,403,876 $40,603,562
====================================================================================================
$-- ....... $ 124,834 $ -- $ -- $ -- $ 768,640 $ 1,016,226
====================================================================================================
</TABLE>
---------------------
55
<PAGE> 57
- ---------------------
ANCHOR SERIES TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GOVERNMENT &
MONEY MARKET FIXED INCOME QUALITY HIGH YIELD
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income:
Interest.................................................. $3,855,511 $1,351,797 $18,382,841 $ 3,123,657
Dividends................................................. -- 3,584 -- 72,101
---------------------------------------------------------
Total income*...................................... 3,855,511 1,355,381 18,382,841 3,195,758
---------------------------------------------------------
Expenses:
Investment management fees................................ 345,223 110,791 1,819,571 226,072
Custodian fees............................................ 20,395 42,142 124,199 55,284
Audit and tax consulting fees............................. 14,600 10,950 16,425 14,600
Reports to investors...................................... 7,300 1,825 20,075 3,650
Trustees' fees............................................ 5,926 385 15,775 2,681
Legal fees................................................ 3,650 1,825 7,300 --
Insurance expense......................................... 1,318 328 3,359 657
Other expenses............................................ 1,677 950 3,655 1,151
---------------------------------------------------------
Total expenses..................................... 400,089 169,196 2,010,359 304,095
---------------------------------------------------------
Less: expense offset...................................... (320) (167) (99) (534)
---------------------------------------------------------
Net expenses.............................................. 399,769 169,029 2,010,260 303,561
---------------------------------------------------------
Net investment income....................................... 3,455,742 1,186,352 16,372,581 2,892,197
---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on investments..................... -- 159,449 7,720,414 384,346
Net realized foreign exchange gain (loss) on other assets
and liabilities........................................... -- -- -- 4,058
Net realized gain on futures contracts...................... -- -- 229,447 --
Change in unrealized appreciation/depreciation of
investments............................................... -- 15,677 1,573,127 (4,005,538)
Change in unrealized foreign exchange gain (loss) on other
assets and liabilities.................................... -- -- -- (2,745)
Change in unrealized appreciation (depreciation) on futures
contracts................................................. -- -- -- --
---------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currencies........................................ -- 175,126 9,522,988 (3,619,879)
---------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $3,455,742 $1,361,478 $25,895,569 ($ 727,682)
=========================================================
---------------
* Net of foreign withholding taxes on interest and dividends
of:....................................................... $ -- $ 115 $ -- $ 433
=========================================================
</TABLE>
See Notes to Financial Statements
- ---------------------
56
<PAGE> 58
<TABLE>
<CAPTION>
GROWTH AND FOREIGN CAPITAL NATURAL STRATEGIC
INCOME SECURITIES GROWTH APPRECIATION RESOURCES MULTI-ASSET MULTI-ASSET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 46,336 $ 54,906 $ 1,029,464 $ 3,570,830 $ 98,623 $ 3,683,492 $ 1,390,371
666,453 603,179 5,365,025 3,554,555 1,018,217 1,021,515 401,455
-------------------------------------------------------------------------------------------------
712,789 658,085 6,394,489 7,125,385 1,116,840 4,705,007 1,791,826
-------------------------------------------------------------------------------------------------
331,720 297,272 3,948,827 5,750,603 344,730 1,457,255 512,866
27,385 168,878 138,976 247,552 40,433 71,558 208,414
14,600 9,125 34,675 52,925 14,600 12,775 14,600
-- 5,475 36,500 40,150 -- 16,425 7,300
1,645 2,566 28,183 43,349 2,820 8,509 4,741
-- -- 10,950 18,250 1,825 3,650 1,825
506 694 5,430 8,311 673 2,256 856
926 4,092 6,206 12,667 1,318 2,409 4,257
-------------------------------------------------------------------------------------------------
376,782 488,102 4,209,747 6,173,807 406,399 1,574,837 754,859
-------------------------------------------------------------------------------------------------
(10) (63) (276) (3,002) (283) (383) (364)
-------------------------------------------------------------------------------------------------
376,772 488,039 4,209,471 6,170,805 406,116 1,574,454 754,495
-------------------------------------------------------------------------------------------------
336,017 170,046 2,185,018 954,580 710,724 3,130,553 1,037,331
-------------------------------------------------------------------------------------------------
6,821,664 (241,875) 46,595,637 51,248,404 (4,087,799) 18,483,095 8,083,476
-- (19,140) -- (4,284) (2,583) -- (211,115)
-- 15,383 -- -- -- 1,135,206 214,805
5,370,411 3,569,408 98,358,771 142,707,660 (5,229,472) 9,455,468 (1,765,867)
-- (26,625) -- 3,437 2,784 -- 27,978
-- -- -- -- -- (210,376) (47,999)
-------------------------------------------------------------------------------------------------
12,192,075 3,297,151 144,954,408 193,955,217 (9,317,070) 28,863,393 6,301,278
-------------------------------------------------------------------------------------------------
$12,528,092 $3,467,197 $147,139,426 $194,909,797 ($ 8,606,346) $31,993,946 $ 7,338,609
=================================================================================================
$4,503...... $ 82,902 $ 33,527 $ 145,532 $ 33,029 -- $ 41,469
=================================================================================================
</TABLE>
---------------------
57
<PAGE> 59
- ---------------------
ANCHOR SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GOVERNMENT &
MONEY MARKET FIXED INCOME QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................... $ 3,455,742 $ 1,186,352 $ 16,372,581 $ 2,892,197
Net realized gain (loss) on investments................. -- 159,449 7,720,414 384,346
Net realized foreign exchange gain (loss) on other
assets and liabilities................................ -- -- -- 4,058
Net realized gain on futures contracts.................. -- -- 229,447 --
Change in unrealized appreciation/depreciation of
investments........................................... -- 15,677 1,573,127 (4,005,538)
Change in unrealized foreign exchange gain (loss) on
other assets and liabilities.......................... -- -- -- (2,745)
Change in unrealized appreciation (depreciation) on
futures contracts..................................... -- -- -- --
------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 3,455,742 1,361,478 25,895,569 (727,682)
------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS:
Distributions from capital gains........................ -- -- (500,000) --
Dividends from net investment income.................... (3,455,742) (1,415,000) (13,600,000) (3,760,000)
------------------------------------------------------------
Total dividends and distributions to shareholders....... (3,455,742) (1,415,000) (14,100,000) (3,760,000)
------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold............................... 172,261,459 3,024,969 327,025,063 16,456,461
Proceeds from shares issued for reinvestment of
dividends and distributions........................... 3,138,912 1,415,000 14,100,000 3,760,000
Cost of shares repurchased.............................. (179,651,239) (5,271,333) (211,876,204) (29,823,279)
------------------------------------------------------------
Net increase (decrease) in net assets resulting from
capital share transactions............................ (4,250,868) (831,364) 129,248,859 (9,606,818)
------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. (4,250,868) (884,886) 141,044,428 (14,094,500)
------------------------------------------------------------
NET ASSETS:
Beginning of period..................................... 69,804,181 18,315,222 234,622,947 40,193,261
------------------------------------------------------------
End of period........................................... $ 65,553,313 $17,430,336 $ 375,667,375 $ 26,098,761
============================================================
---------------
Accumulated undistributed net investment income
(loss)................................................ $ (1,211) $ 1,148,173 $ 16,374,488 $ 2,844,811
============================================================
Shares issued and repurchased:
Sold.................................................... 172,261,459 223,978 22,544,620 2,203,779
Issued in reinvestment of dividends and distributions... 3,138,912 109,520 979,167 574,924
Repurchased............................................. (179,651,239) (392,187) (14,658,468) (3,737,618)
------------------------------------------------------------
Net increase (decrease)................................. (4,250,868) (58,689) 8,865,319 (958,915)
============================================================
</TABLE>
See Notes to Financial Statements
- ---------------------
58
<PAGE> 60
<TABLE>
<CAPTION>
GROWTH AND FOREIGN CAPITAL NATURAL STRATEGIC
INCOME SECURITIES GROWTH APPRECIATION RESOURCES MULTI-ASSET MULTI-ASSET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 336,017 $ 170,046 $ 2,185,018 $ 954,580 $ 710,724 $ 3,130,553 $ 1,037,331
6,821,664 (241,875) 46,595,637 51,248,404 (4,087,799) 18,483,095 8,083,476
-- (19,140) -- (4,284) (2,583) -- (211,115)
-- 15,383 -- -- -- 1,135,206 214,805
5,370,411 3,569,408 98,358,771 142,707,660 (5,229,472) 9,455,468 (1,765,867)
-- (26,625) -- 3,437 2,784 -- 27,978
-- -- -- -- -- (210,376) (47,999)
---------------------------------------------------------------------------------------------------------
12,528,092 3,467,197 147,139,426 194,909,797 (8,606,346) 31,993,946 7,338,609
---------------------------------------------------------------------------------------------------------
(1,830,000) (3,725,000) (31,210,000) (74,450,000) (425,000) (22,720,000) (7,725,000)
(400,000) (520,000) (2,560,000) (500,000) (620,000) (3,675,000) (1,050,000)
---------------------------------------------------------------------------------------------------------
(2,230,000) (4,245,000) (33,770,000) (74,950,000) (1,045,000) (26,395,000) (8,775,000)
---------------------------------------------------------------------------------------------------------
19,076,191 15,620,340 259,990,058 638,786,503 22,578,157 12,700,692 1,960,272
2,230,000 4,245,000 33,770,000 74,950,000 1,045,000 26,395,000 8,775,000
(23,831,304) (25,534,571) (223,327,903) (547,361,436) (24,726,866) (43,668,103) (13,333,802)
---------------------------------------------------------------------------------------------------------
(2,525,113) (5,669,231) 70,432,155 166,375,067 (1,103,709) (4,572,411) (2,598,530)
---------------------------------------------------------------------------------------------------------
7,772,979 (6,447,034) 183,801,581 286,334,864 (10,755,055) 1,026,535 (4,034,921)
---------------------------------------------------------------------------------------------------------
44,416,660 $ 36,148,256 485,528,260 814,311,066 50,053,932 145,685,434 53,289,150
---------------------------------------------------------------------------------------------------------
$52,189,639 $ 29,701,222 $ 669,329,841 $1,100,645,930 $ 39,298,877 $146,711,969 $ 49,254,229
=========================================================================================================
$ 314,011 $ 38,059 $ 2,119,618 $ 884,964 $ 651,667 $ 3,123,018 $ 1,023,157
=========================================================================================================
1,003,191 1,365,941 8,911,772 19,386,978 1,680,379 925,146 172,090
131,408 452,558 1,337,426 2,741,404 94,144 2,259,846 975,000
(1,253,473) (2,209,336) (7,621,126) (16,484,716) (1,853,949) (3,083,297) (1,164,033)
---------------------------------------------------------------------------------------------------------
(118,874) (390,837) 2,628,072 5,643,666 (79,426) 101,695 (16,943)
=========================================================================================================
</TABLE>
---------------------
59
<PAGE> 61
- ---------------------
ANCHOR SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GOVERNMENT &
MONEY MARKET FIXED INCOME QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................................... $ 3,870,009 $ 1,360,950 $ 13,340,124 $ 3,587,998
Net realized gain (loss) on investments.................... -- 2,846 (164,068) 1,614,047
Net realized foreign exchange gain (loss) on other assets
and liabilities.......................................... -- -- -- --
Net realized gain on futures contracts..................... -- -- -- --
Change in unrealized appreciation/depreciation
of investments........................................... -- 379,729 6,917,378 (803,941)
Change in unrealized foreign exchange gain/loss on other
assets and liabilities................................... -- -- -- 2,745
Change in unrealized appreciation/depreciation on futures
contracts................................................ -- -- -- --
------------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................... 3,870,009 1,743,525 20,093,434 4,400,849
------------- ----------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from capital gains........................... -- -- (790,000) --
Dividends from net investment income....................... (3,870,009) (1,670,000) (13,980,000) (4,025,000)
------------- ----------- ------------ ------------
Total dividends and distributions to shareholders.......... (3,870,009) (1,670,000) (14,770,000) (4,025,000)
------------- ----------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.................................. 179,789,798 1,882,041 84,629,814 25,080,588
Proceeds from shares issued for reinvestment of dividends
and distributions........................................ 3,870,009 1,670,000 14,770,000 4,025,000
Cost of shares repurchased................................. (187,856,279) (8,053,346) (91,703,378) (34,974,896)
------------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting from
capital
share transactions....................................... (4,196,472) (4,501,305) 7,696,436 (5,869,308)
------------- ----------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................... (4,196,472) (4,427,780) 13,019,870 (5,493,459)
NET ASSETS:
Beginning of period........................................ 74,000,653 22,743,002 221,603,077 45,686,720
------------- ----------- ------------ ------------
End of period.............................................. $ 69,804,181 $18,315,222 $234,622,947 $ 40,193,261
============= =========== ============ ============
---------------
Accumulated undistributed net investment income............ $ 632 $ 1,372,518 $ 13,552,555 $ 3,705,994
============= =========== ============ ============
Shares issued and repurchased:
Sold....................................................... 179,789,798 140,887 6,117,786 2,936,419
Issued in reinvestment of dividends and distributions...... 3,870,009 130,367 1,100,596 492,656
Repurchased................................................ (187,856,279) (601,742) (6,625,026) (4,080,564)
------------- ----------- ------------ ------------
Net increase (decrease).................................... (4,196,472) (330,488) 593,356 (651,489)
============= =========== ============ ============
</TABLE>
See Notes to Financial Statements
- ---------------------
60
<PAGE> 62
- ---------------------
<TABLE>
<CAPTION>
GROWTH AND FOREIGN CAPITAL NATURAL STRATEGIC
TARGET '98 INCOME SECURITIES GROWTH APPRECIATION RESOURCES MULTI-ASSET MULTI-ASSET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 602,239 $ 385,947 $ 389,224 $ 2,540,107 $ 467,861 $ 601,049 $ 3,619,001 $ 1,027,396
(17,879) 1,874,021 1,955,084 31,187,271 71,694,746 417,576 22,517,840 7,616,407
-- -- (207,950) -- (3,171) (328) 58 (11,793)
-- -- 274,991 -- 1,527,540 -- 157,744 67,891
(137,546) 7,471,248 (2,293,078) 75,254,383 78,026,936 (5,760,825) 2,368,322 (1,149,205)
-- -- (14,202) -- (7,316) (2,530) 14 (19,409)
-- -- (28,021) -- (393,750) -- 41,850 71,793
---------- ------------ ------------ ------------- ------------- ------------ ------------- ------------
446,814 9,731,216 76,048 108,981,761 151,312,846 (4,745,058) 28,704,829 7,603,080
---------- ------------ ------------ ------------- ------------- ------------ ------------- ------------
-- (3,000) (3,775,000) (44,990,000) (63,555,000) (3,075,000) (20,195,000) (9,430,000)
(825,000) (865,000) (985,000) (3,085,000) (1,055,000) (535,000) (4,135,000) (1,270,000)
---------- ------------ ------------ ------------- ------------- ------------ ------------- ------------
(825,000) (868,000) (4,760,000) (48,075,000) (64,610,000) (3,610,000) (24,330,000) (10,700,000)
---------- ------------ ------------ ------------- ------------- ------------ ------------- ------------
488,918 17,209,143 14,889,890 172,256,188 594,961,738 33,911,861 15,771,917 5,143,306
825,000 868,000 4,760,000 48,075,000 64,610,000 3,610,000 24,330,000 10,700,000
(3,694,795) (15,988,972) (26,853,371) (162,312,016) (499,635,823) (24,442,072) (49,410,173) (17,201,470)
---------- ------------ ------------ ------------- ------------- ------------ ------------- ------------
(2,380,877) 2,088,171 (7,203,481) 58,019,172 159,935,915 13,079,789 (9,308,256) (1,358,164)
---------- ------------ ------------ ------------- ------------- ------------ ------------- ------------
(2,759,063) 10,951,387 (11,887,433) 118,925,933 246,638,761 4,724,731 (4,933,427) (4,455,084)
10,171,541 33,465,273 48,035,689 366,602,327 567,672,305 45,329,201 150,618,861 57,744,234
---------- ------------ ------------ ------------- ------------- ------------ ------------- ------------
$7,412,478 $ 44,416,660 $ 36,148,256 $ 485,528,260 $ 814,311,066 $ 50,053,932 $ 145,685,434 $ 53,289,150
========== ============ ============ ============= ============= ============ ============= ============
$ 593,334 $ 377, 994 $ 440,430 $ 2,514,747 $ 443,996 $ 591,715 $ 3,631,038 $ 1,039,089
========== ============ ============ ============= ============= ============ ============= ============
41,786 1,098,773 1,175,585 6,579,872 19,642,838 2,040,810 1,110,108 410,357
75,619 53,713 389,844 1,855,461 2,046,563 215,909 1,886,047 960,503
(319,495) (1,023,740) (2,107,426) (6,287,471) (16,686,320) (1,473,329) (3,503,935) (1,380,080)
---------- ------------ ------------ ------------- ------------- ------------ ------------- ------------
(202,090) 128,746 (541,997) 2,147,862 5,003,081 783,390 (507,780) (9,220)
========== ============ ============ ============= ============= ============ ============= ============
</TABLE>
---------------------
61
<PAGE> 63
- ---------------------
ANCHOR SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION: Anchor Series Trust (the "Trust") was organized as a
business trust under the laws of the Commonwealth of Massachusetts on August 26,
1983. The Trust is registered under the Investment Company Act of 1940, as
amended, as an open-end diversified management investment company. Shares of the
portfolios are issued and redeemed only in connection with investments in and
payments under variable annuity contracts and variable life insurance policies
("Variable Contracts") of Anchor National Life Insurance Company, First
SunAmerica Life Insurance Company, Phoenix Mutual Life Insurance Company and
Presidential Life Insurance Company (the "Life Companies").
The investment objectives for each portfolio are as follows:
The MONEY MARKET PORTFOLIO seeks current income consistent with stability of
principal through investment in a diversified portfolio of money market
instruments maturing in 397 days or less.
The FIXED INCOME PORTFOLIO seeks a high level of current income consistent with
preservation of capital and invests primarily in investment grade, fixed income
securities.
The GOVERNMENT & QUALITY BOND PORTFOLIO seeks relatively high current income,
liquidity and security of principal.
The HIGH YIELD PORTFOLIO seeks to produce high current income and secondarily
seeks capital appreciation by investing in high-yielding, high-risk, income
producing corporate bonds.
The GROWTH AND INCOME PORTFOLIO seeks to provide high current income and
long-term capital appreciation by investing primarily in securities that provide
the potential for growth and offer income, such as dividend-paying stocks and
securities convertible into common stock.
The FOREIGN SECURITIES PORTFOLIO seeks long-term capital appreciation through
investment primarily in equity securities issued by foreign companies.
The GROWTH PORTFOLIO seeks capital appreciation primarily through investments in
growth equity securities.
The CAPITAL APPRECIATION PORTFOLIO seeks long-term capital appreciation by
investing in growth equity securities which are widely diversified by industry
and company.
The NATURAL RESOURCES PORTFOLIO seeks a total return through investment
primarily in equity securities of U.S. or foreign companies which are expected
to provide favorable returns in periods of rising inflation.
The MULTI-ASSET PORTFOLIO seeks long-term total investment return consistent
with moderate investment risk by investing in equity securities, convertible
securities, investment grade fixed income securities and money market
securities.
The STRATEGIC MULTI-ASSET PORTFOLIO seeks high long-term total investment return
by investing in equity securities, aggressive growth equity securities,
international equity securities, investment grade bonds, high-yield, high-risk
bonds and money market instruments.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES: The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements.
SECURITY VALUATIONS: Stocks are stated at value based upon closing sales prices
reported on recognized securities exchanges or, for listed securities having no
sales reported and for unlisted securities, upon last-reported bid prices.
Nonconvertible bonds, debentures, and other long-term debt securities are valued
at prices obtained for the day of valuation from a bond pricing service of a
major dealer in bonds when such prices are available; however, in circumstances
where the investment adviser deems it appropriate to do so, an over-the-counter
or exchange quotation at the mean of representative bid or asked prices may be
used. Securities traded primarily on securities exchanges outside the United
States are valued at the last sale price on such exchanges on the day of
valuation, or if there is no sale on the day of valuation, at the last reported
bid price. If a security's price is available from more than one foreign
exchange, a portfolio uses the exchange that is the primary market for the
security. Except for the Money Market Portfolio, short-term securities with
original or remaining maturities in excess of 60 days are valued at the mean of
their quoted bid and ask prices. Discounts or premiums on short-term securities
with 60 days or less to maturity are amortized to maturity. Discounts and
premiums are determined based upon the cost of the securities to the Trust if
acquired within 60 days of maturity or, if already held by the Trust on the 60th
day, are amortized to maturity based on the value determined on the 61st day.
Securities for which quotations are not readily available are valued at fair
value as determined in good faith under the direction of the Trust's Trustees.
For the Money Market Portfolio, securities are valued at amortized cost, which
approximates market value. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of any discount or premium.
- ---------------------
62
<PAGE> 64
FOREIGN CURRENCY TRANSLATION: The books and records of the Trust are maintained
in U.S. dollars.
Market values of investment securities are translated into U.S. dollars at the
prevailing rate of exchange on the valuation date.
Assets and liabilities denominated in foreign currencies and commitments under
forward foreign currency contracts ("forward contracts") are translated into
U.S. dollars at the mean of the quoted bid and asked prices of such currencies
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at rates of exchange prevailing when
earned or incurred.
The Trust does not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in the
market prices of securities held at fiscal year-end. The Trust does not isolate
the effect of changes in foreign exchange rates from the changes in the market
prices of portfolio securities sold during the year.
Realized foreign exchange gain (loss) on other assets and liabilities and
change in unrealized foreign exchange gain (loss) on other assets and
liabilities include realized foreign exchange gains and losses from currency
gains or losses realized between the trade and settlement dates of securities
transactions, the difference between the amounts of interest, dividends,
discount and foreign withholding taxes recorded on the Trust's books and the
U.S. dollar equivalent amounts actually received or paid and changes in the
unrealized foreign exchange gains and losses relating to other assets and
liabilities arising as a result of changes in the exchange rate.
SECURITIES TRANSACTIONS, DIVIDENDS, INVESTMENT INCOME AND EXPENSES: Securities
transactions are accounted for as of the trade date. Interest income is accrued
daily except when collection is not expected. Dividend income is recorded on the
ex-dividend date except for certain dividends from foreign securities which are
recorded as soon as the Trust is informed after the ex-dividend date. The Trust
does not amortize premiums or accrete discounts on fixed income securities,
other than short-term securities, except those original issue discounts for
which amortization is required for federal income tax purposes; gains and losses
realized upon the sale of such securities are based on their identified cost.
Portfolios which earn foreign income and capital gains may be subject to
foreign withholding taxes at various rates.
Common expenses incurred by the Trust are allocated among the portfolios based
upon relative net assets. In all other respects, expenses are charged to each
portfolio as incurred on a specific identification basis.
The Trust records dividends and distributions to its shareholders on the
ex-dividend date.
The amount of dividends and distributions from net investment income and net
realized capital gains are determined and presented in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains. To the extent distributions exceed current
and accumulated earnings and profits for federal income tax purposes, they are
reported as distributions of paid-in capital. Net investment income/loss, net
realized gain/loss, and net assets are not affected.
For the year ended December 31, 1998, the reclassification arising from
book/tax differences resulted in increases (decreases) to the components of net
assets as follows:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED
NET REALIZED UNDISTRIBUTED PAID
INVESTMENT NET REALIZED IN
INCOME/LOSS GAIN/LOSS CAPITAL
<S> <C> <C> <C>
---------------------------------------------
Money Market Portfolio...................................... $ (1,843) $ 1,843 $ --
Fixed Income Portfolio...................................... 4,303 446,090 (450,393)
Government & Quality Bond Portfolio......................... 49,352 (45,131) (4,221)
High Yield Portfolio........................................ 6,620 3,386,557 (3,393,177)
Growth and Income Portfolio................................. -- -- --
Foreign Securities Portfolio................................ (52,417) 52,417 --
Growth Portfolio............................................ (20,147) 20,147 --
Capital Appreciation Portfolio.............................. (13,612) 13,611 1
Natural Resources Portfolio................................. (30,772) 25,698 5,074
Multi-Asset Portfolio....................................... 36,427 (36,427) --
Strategic Multi-Asset Portfolio............................. (3,263) 2,714 549
</TABLE>
Reclassifications are primarily due to differing book and tax treatments for
foreign currency transactions, market discount, paydowns, and expiring capital
loss carryovers.
NOTE 3. OPERATING POLICIES:
REPURCHASE AGREEMENTS: The Trust's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to assure that the value, including
accrued interest, is at least 102% of the repurchase price. In the event of
default of the obligation to repurchase, the Trust has the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if
---------------------
63
<PAGE> 65
bankruptcy proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Trust may be delayed or limited.
At December 31, 1998, the Fixed Income, Government & Quality Bond, High Yield,
Growth and Income, Foreign Securities, Growth, Capital Appreciation, Natural
Resources, Multi-Asset and Strategic Multi-Asset Portfolios had a 0.1%, 11.8%,
1.5%, 1.4%, 1.0%, 19.0%, 49.0%, 1.0%, 6.7% and 1.7%, respectively, undivided
interest, representing $115,000, $11,965,000, $1,495,000, $1,445,000,
$1,015,000, $19,260,000, $49,680,000, $1,055,000, $6,835,000 and $1,735,000,
respectively, in principal amount, in a joint repo with J.P. Morgan Securities,
which is dated December 31, 1998, bears interest at the rate of 4.70% per annum,
has a principal amount of $101,460,000 and a repurchase price of $101,512,985,
matures on January 4, 1999 and is collateralized by $50,000,000 of U.S. Treasury
Bonds, which bear interest at a rate of 6.125% per annum, matures 11/15/2007,
and $30,193,000 of U.S. Treasury Bonds, which bear interest at a rate of 12.00%
per annum, mature 8/15/2013; and have an approximate aggregate value of
$103,957,781.
FORWARD FOREIGN CURRENCY CONTRACTS: Certain portfolios may enter into forward
contracts to attempt to protect securities and related receivables and payables
against changes in future foreign exchange rates. A forward contract is an
agreement between two parties to buy or sell currency at a set price on a future
date. The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily using the forward rate
and the change in market value is recorded by the portfolio as unrealized gain
or loss. Upon settlement date, the portfolio records either realized gains or
losses when the contract is closed equal to the difference between the value of
the contract at the time it was opened and the value at the time it was closed.
Risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Forward contracts involve elements of risk in excess of the amount reflected in
the Statement of Assets and Liabilities. A portfolio bears the risk of an
unfavorable change in the foreign exchange rate underlying the forward contract.
FUTURES CONTRACTS: A futures contract is an agreement between two parties to
buy or sell a financial instrument at a set price on a future date. Upon
entering into such a contract the Trust is required to pledge to the broker an
amount of cash or U.S. government securities equal to the minimum "initial
margin" requirements of the exchange on which the futures contract is traded.
The contract amount reflects the extent of a portfolio's exposure in these
financial instruments. A portfolio's participation in the futures markets
involves certain risks, including imperfect correlation between movements in the
price of futures contracts and movements in the price of the securities hedged
or used for cover. The Trust's activities in futures contracts are conducted
through regulated exchanges which do not result in counterparty credit risks.
Pursuant to a contract the portfolios agree to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as "variation margin" and are recorded by the
portfolios as unrealized appreciation or depreciation. When a contract is
closed, the portfolios record a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed.
NOTE 4. FEDERAL INCOME TAXES: It is each portfolio's policy to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income to shareholders.
Therefore, no federal income tax provision is required. Each portfolio is
considered a separate entity for tax purposes.
At December 31, 1998, the cost of investment securities for tax purposes,
including short-term securities and aggregate gross unrealized gain (loss) for
each portfolio were as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED GAIN (LOSS) COST OF CAPITAL LOSS
GAIN LOSS NET INVESTMENTS CARRYOVER EXPIRATION
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
Money Market Portfolio................ $ -- $ -- $ -- $ 65,604,895 $ -- --
Fixed Income Portfolio................ 628,807 (326,023) 302,784 16,803,031 1,040,022 2002
Government & Quality Bond Portfolio... 8,257,833 (811,908) 7,445,925 373,580,470 -- --
High Yield Portfolio*................. 351,219 (3,723,421) (3,372,202) 29,066,984 5,402,633 1999-2003
Growth and Income Portfolio........... 17,908,510 (1,054,301) 16,854,209 35,321,619 -- --
Foreign Securities Portfolio**........ 4,394,347 (726,523) 3,667,824 26,038,965 1,786,520 2006
Growth Portfolio...................... 266,301,025 (12,881,465) 253,419,560 418,463,553 -- --
Capital Appreciation Portfolio*....... 356,238,238 (40,002,596) 316,235,642 780,970,434 -- --
Natural Resources Portfolio**......... 2,802,369 (9,056,844) (6,254,475) 44,602,910 4,083,131 2006
Multi-Asset Portfolio................. 40,771,962 (1,337,729) 39,434,233 107,007,516 -- --
Strategic Multi-Asset Portfolio**..... 7,590,201 (1,742,363) 5,847,838 43,378,543 -- --
</TABLE>
The Money Market, Fixed Income and High Yield portfolios utilized capital loss
carryovers of $632, $108,336 and $690,243, respectively, to partially offset the
portfolios' net taxable gains realized and recognized in the year ended December
31, 1998. In addition $450,399 and $3,393,175, respectively, of prior year
capital loss carryover for the Fixed Income and High Yield portfolios expired as
of December 31, 1998.
* Post 10/31 Capital Loss Deferrals: High Yield $308,457 and Capital
Appreciation $8,425,601.
** Post 10/31 Foreign Exchange Loss Deferrals: Foreign Securities $21,105,
Natural Resources $795 and Strategic Multi-Asset $50,746.
NOTE 5. INVESTMENT MANAGEMENT AGREEMENTS: The Trust has entered into an
Investment Advisory and Management Agreement (the "Management Agreement") with
SunAmerica Asset Management Corp. ("SAAMCo") with respect to each portfolio.
SAAMCo serves as manager for each of the portfolios. The Management Agreements
provide that SAAMCo shall act as investment adviser to
- ---------------------
64
<PAGE> 66
the Trust; manage the Trust's investments; administer its business affairs;
furnish offices, necessary facilities and equipment; provide clerical,
bookkeeping and administrative services; and permit any of its officers or
employees to serve, without compensation, as trustees or officers of the Trust,
if duly elected to such positions.
The Trust pays SAAMCo a monthly fee calculated daily at the following annual
percentages of each portfolio's average daily net assets:
<TABLE>
<CAPTION>
AVERAGE DAILY MANAGEMENT
PORTFOLIO NET ASSETS FEE
- -------------------------------------------------------
<S> <C> <C>
Money Market $0-$150 million .500%
> $150 million .475%
> $250 million .450%
> $500 million .425%
Government & Quality
Bond/ $0-$200 million .625%
Fixed Income > $200 million .575%
> $500 million .500%
High Yield $0-$250 million .700%
> $250 million .575%
> $500 million .500%
Growth and Income $0-$100 million .700%
> $100 million .650%
> $250 million .600%
> $500 million .575%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE DAILY MANAGEMENT
PORTFOLIO NET ASSETS FEE
- -------------------------------------------------------
<S> <C> <C>
Foreign Securities $0-$100 million .900%
> $100 million .825%
> $250 million .750%
> $500 million .700%
Growth $0-$250 million .750%
> $250 million .675%
> $500 million .600%
Capital Appreciation $0-$100 million .750%
> $100 million .675%
> $250 million .625%
> $500 million .600%
Natural Resources > $0 .750%
Strategic Multi-Asset/ $0-$200 million 1.000%
Multi-Asset > $200 million .875%
> $500 million .800%
</TABLE>
SAAMCO has entered into Subadvisory Agreements (the "Subadvisory Agreement")
with Wellington Management Company ("WMC") to manage the investments of each
portfolio.
The portion of the investment advisory fees received by SAAMCo which are paid
to WMC are as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY WMC
PORTFOLIO NET ASSETS ALLOCATION
- -------------------------------------------------------
<S> <C> <C>
Money Market $0-$500 million .075%
> $500 million .020%
Government & Quality
Bond/ $0-$ 50 million .225%
Fixed Income > $ 50 million .125%
> $100 million .100%
High Yield $0-$ 50 million .300%
> $ 50 million .225%
> $150 million .175%
> $500 million .150%
Growth/ $0-$ 50 million .325%
Growth and Income > $ 50 million .225%
> $150 million .200%
> $500 million .150%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE DAILY WMC
PORTFOLIO NET ASSETS ALLOCATION
- -------------------------------------------------------
<S> <C> <C>
Foreign Securities $0-$ 50 million .400%
> $ 50 million .275%
> $150 million .200%
> $500 million .150%
Capital Appreciation $0-$ 50 million .375%
> $ 50 million .275%
> $150 million .200%
> $500 million .150%
Natural Resources $0-$ 50 million .350%
> $ 50 million .250%
> $150 million .200%
> $500 million .150%
Multi-Asset $0-$ 50 million .250%
> $ 50 million .175%
> $150 million .150%
Strategic Multi-Asset $0-$ 50 million .300%
> $ 50 million .200%
> $150 million .175%
> $500 million .150%
</TABLE>
For the year ended December 31, 1998, SAAMCo received fees of $15,177,428 from
the Trust, of which SAAMCo informed the Trust that $10,760,905 was retained and
$4,416,523 was allocated to WMC.
---------------------
65
<PAGE> 67
NOTE 6. SECURITIES TRANSACTIONS: The portfolios had the following purchases and
sales of long-term securities for the year ended December 31, 1998:
<TABLE>
<CAPTION>
MONEY GOVERNMENT & GROWTH
MARKET FIXED INCOME QUALITY BOND HIGH YIELD AND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------
Purchases of portfolio securities (excluding U.S.
government securities)............................ $ -- $ 3,444,607 $63,152,252 $33,808,237 $19,007,503
Sales of portfolio securities (excluding U.S.
government securities)............................ -- 3,774,687 19,646,401 43,982,664 23,858,200
U.S. government securities excluded above were as
follows:
Purchases of U.S. government securities............. -- 2,148,669 512,959,159 -- --
Sales of U.S. government securities................. -- 2,662,676 406,331,422 -- --
</TABLE>
<TABLE>
<CAPTION>
FOREIGN CAPITAL NATURAL STRATEGIC
SECURITIES GROWTH APPRECIATION RESOURCES MULTI-ASSET MULTI-ASSET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------
Purchases of portfolio securities
(excluding U.S. government
securities)......................... $44,790,878 $188,197,544 $621,613,719 $22,771,957 $38,151,878 $71,661,145
Sales of portfolio securities
(excluding U.S. government
securities)......................... 54,614,036 147,150,965 502,104,285 22,471,302 43,866,853 75,270,366
U.S. government securities excluded
above were as follows:
Purchases of U.S. government
securities.......................... -- -- -- -- 33,572,007 1,339,060
Sales of U.S. government securities... -- -- -- -- 53,675,529 7,240,286
</TABLE>
NOTE 7. TRANSACTIONS WITH AFFILIATES: The following Portfolio incurred
brokerage commissions with an affiliated broker:
<TABLE>
<CAPTION>
ADVANTAGE SUNAMERICA
CAPITAL CORP. SECURITIES, INC.
------------- ----------------
<S> <C> <C>
Growth and Income Portfolio................................. $ -- $ 399
Growth Portfolio............................................ 2,244 8,106
Capital Appreciation Portfolio.............................. 3,000 15,102
Multi-Asset Portfolio....................................... -- 2,382
</TABLE>
NOTE 8. TRUSTEES RETIREMENT PLAN: The Trustees (and Directors) of the
SunAmerica Family of Mutual Funds have adopted the SunAmerica Disinterested
Trustees' and Directors' Retirement Plan (the "Retirement Plan") effective
January 1, 1993 for the unaffiliated Trustees. The Retirement Plan provides
generally that if an unaffiliated Trustee who has at least 10 years of
consecutive service as a Disinterested Trustee of any of the SunAmerica mutual
funds (an "Eligible Trustee") retires after reaching age 60 but before age 70 or
dies while a Trustee, such person will be eligible to receive a retirement or
death benefit from each SunAmerica mutual fund with respect to which he or she
is an Eligible Trustee. As of each birthday, prior to the 70th birthday, but in
no event for a period greater than 10 years, each Eligible Trustee will be
credited with an amount equal to 50% of his or her regular fees (excluding
committee fees) for services as a Disinterested Trustee of each SunAmerica
mutual fund for the calendar year in which such birthday occurs. In addition, an
amount equal to 8.5% of any amounts credited under the preceding clause during
prior years, is added to each Eligible Trustee's account until such Eligible
Trustee reaches his or her 70th birthday. An Eligible Trustee may receive
benefits payable under the Retirement Plan, at his or her election, either in
one lump sum or in up to fifteen annual installments. As of December 31, 1998,
the Trust had accrued $162,378 for the Retirement Plan, which is included in
accrued expenses on the Statement of Assets and Liabilities and for the year
ended December 31, 1998, expensed $40,293 for the Retirement Plan, which is
included in Trustee fees and expenses on the Statement of Operations.
NOTE 9. SUBSEQUENT EVENTS: On January 1, 1999, SunAmerica Inc., pursuant to the
terms of an agreement entered into with American International Group, Inc.
("AIG"), merged with and into AIG, and consequently, SunAmerica Asset Management
Corp. ("SAAMCo"), which acts as investment adviser of Anchor Series Trust (the
"Trust"), became an indirect wholly owned subsidiary of AIG. In connection
therewith, on December 30, 1998, shareholders approved a new investment advisory
and management agreement with SAAMCo to take effect on January 1, 1999. The new
agreement has no effect on the fees or expenses payable by the Trust or its
shareholders.
- ---------------------
66
<PAGE> 68
- ---------------------
ANCHOR SERIES TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET DIVIDENDS DIVIDENDS
REALIZED TOTAL DECLARED FROM NET NET
NET ASSET NET & UNREALIZED FROM FROM NET REALIZED NET ASSET ASSETS
VALUE INVEST- GAIN (LOSS) INVEST- INVEST- GAIN ON VALUE END OF
PERIOD BEGINNING MENT ON MENT MENT INVEST- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME* INVESTMENTS OPERATIONS INCOME MENTS PERIOD RETURN** (000'S)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Money Market Portfolio
12/31/94 $ 1.00 $0.04 $ -- $ 0.04 $(0.04) $ -- $ 1.00 3.8% $126,004
12/31/95 1.00 0.05 -- 0.05 (0.05) -- 1.00 5.6 93,692
12/31/96 1.00 0.05 -- 0.05 (0.05) -- 1.00 5.0 74,001
12/31/97 1.00 0.05 -- 0.05 (0.05) -- 1.00 5.1 69,804
12/31/98 1.00 0.05 -- 0.05 (0.05) -- 1.00 5.1 65,553
Fixed Income Portfolio
12/31/94 14.54 0.89 (1.36) (0.47) (1.17) -- 12.90 (3.2) 28,582
12/31/95 12.90 0.90 1.52 2.42 (1.16) -- 14.16 19.2 27,975
12/31/96 14.16 0.93 (0.64) 0.29 (1.15) -- 13.30 2.4 22,743
12/31/97 13.30 0.91 0.30 1.21 (1.23) -- 13.28 9.4 18,315
12/31/98 13.28 0.90 0.14 1.04 (1.12) -- 13.20 8.0 17,430
Government & Quality Bond Portfolio
12/31/94 14.22 0.86 (1.30) (0.44) (0.73) (0.19) 12.86 (3.1) 232,530
12/31/95 12.86 0.90 1.55 2.45 (1.08) -- 14.23 19.4 225,579
12/31/96 14.23 0.87 (0.50) 0.37 (0.90) (0.03) 13.67 2.9 221,603
12/31/97 13.67 0.84 0.42 1.26 (0.92) (0.05) 13.96 9.5 234,623
12/31/98 13.96 0.79 0.48 1.27 (0.57) (0.02) 14.64 9.2 375,667
High Yield Portfolio
12/31/94 9.43 0.15 (0.56) (0.41) (1.15) -- 7.87 (4.5) 48,057
12/31/95 7.87 0.77 0.67 1.44 (0.98) -- 8.33 18.8 46,817
12/31/96 8.33 0.74 0.19 0.93 (0.88) -- 8.38 11.7 45,687
12/31/97 8.38 0.75 0.18 0.93 (0.93) -- 8.38 11.4 40,193
12/31/98 8.38 0.71 (1.13) (0.42) (1.16) -- 6.80 (4.5) 26,099
Growth and Income Portfolio
12/31/94 14.58 0.66 (1.96) (1.30) (0.52) (1.20) 11.56 (9.7) 34,995
12/31/95 11.56 0.61 1.29 1.90 (0.83) (0.62) 12.01 16.6 32,008
12/31/96++ 12.01 0.33 2.02 2.35 (0.77) -- 13.59 20.2 33,465
12/31/97 13.59 0.15 3.74 3.89 (0.34) -- 17.14 28.8 44,417
12/31/98 17.14 0.14 4.80 4.94 (0.17) (0.80) 21.11 30.2 52,190
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME PORTFOLIO
PERIOD TO AVERAGE TO AVERAGE TURNOVER
ENDED NET ASSETS NET ASSETS RATE
<S> <C> <C> <C>
12/31/94 0.6% 3.8% --%
12/31/95 0.6 5.5 --
12/31/96 0.6 4.9 --
12/31/97 0.6 5.0 --
12/31/98 0.6(1) 5.0 --
12/31/94 0.8 6.5 56.5
12/31/95 0.8 6.5 76.7
12/31/96 0.8 6.8 77.9
12/31/97 0.9 6.9 58.0
12/31/98 1.0(1) 6.7 32.5
12/31/94 0.7 6.4 117.6
12/31/95 0.7 6.5 135.2
12/31/96 0.7 6.3 106.7
12/31/97 0.7 6.1 75.7
12/31/98 0.7(1) 5.5 150.2
12/31/94 0.9 9.0 97.9
12/31/95 0.9 9.2 68.1
12/31/96 0.9 8.8 58.0
12/31/97 0.9 8.8 101.4
12/31/98 0.9(1) 9.0 109.6
12/31/94 0.9 4.9 50.7
12/31/95 0.9 5.2 88.8
12/31/96 0.9 2.5 108.5
12/31/97 0.8 1.0 49.4
12/31/98 0.8(1) 0.7 41.0
</TABLE>
- ---------------
* Selected data for a share of beneficial interest outstanding throughout each
period (calculated based upon average shares outstanding)
** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company, First SunAmerica Life Insurance Company,
Phoenix Mutual Life Insurance Company and Presidential Life Insurance
Company. If such expenses had been included, total return would have been
lower for each period presented.
++ Prior to March 1, 1996, the portfolio was invested primarily in convertible
debt securities. After that date, the portfolio primarily invests in common
stock.
(1) The expense ratio reflects the effect of a gross up of custody expense
credits.
---------------------
67
<PAGE> 69
- ---------------------
ANCHOR SERIES TRUST
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET DIVIDENDS DIVIDENDS
REALIZED TOTAL DECLARED FROM NET NET
NET ASSET NET & UNREALIZED FROM FROM NET REALIZED NET ASSET ASSETS
VALUE INVESTMENT GAIN (LOSS) INVEST- INVEST- GAIN ON VALUE END OF
PERIOD BEGINNING INCOME ON MENT MENT INVEST- END OF TOTAL PERIOD
ENDED OF PERIOD (LOSS)* INVESTMENTS OPERATIONS INCOME MENTS PERIOD RETURN** (000'S)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Foreign Securities Portfolio
12/31/94 $10.93 $ 0.11 $(0.46) $(0.35) $(0.03) $ -- $10.55 (3.2)% $ 68,641
12/31/95 10.55 0.13 1.19 1.32 (0.05) (0.01) 11.81 12.6 53,609
12/31/96 11.81 0.15 1.19 1.34 (0.21) -- 12.94 11.5 48,036
12/31/97 12.94 0.11 (0.14) (0.03) (0.31) (1.20) 11.40 (1.0) 36,148
12/31/98 11.40 0.06 0.92 0.98 (0.21) (1.48) 10.69 10.7 29,701
Growth Portfolio
12/31/94 22.32 0.05 (1.03) (0.98) (0.05) (3.11) 18.18 (4.7) 246,149
12/31/95 18.18 0.11 4.62 4.73 (0.05) (3.38) 19.48 26.3 307,857
12/31/96 19.48 0.20 4.57 4.77 (0.11) (0.95) 23.19 25.0 366,602
12/31/97 23.19 0.16 6.76 6.92 (0.20) (2.87) 27.04 30.4 485,528
12/31/98 27.04 0.11 7.19 7.30 (0.14) (1.68) 32.52 29.0 669,330
Capital Appreciation Portfolio
12/31/94 20.28 (0.02) (0.71) (0.73) -- (2.04) 17.51 (3.8) 229,544
12/31/95 17.51 0.06 6.00 6.06 (0.15) (0.20) 23.22 34.6 356,218
12/31/96 23.22 0.06 5.73 5.79 (0.06) (0.95) 28.00 25.1 567,672
12/31/97 28.00 0.02 7.05 7.07 (0.05) (2.81) 32.21 25.4 814,311
12/31/98 32.21 0.04 6.24 6.28 (0.02) (2.88) 35.59 22.2 1,100,646
Natural Resources Portfolio
12/31/94 13.33 0.23 (0.09) 0.14 (0.09) (0.09) 13.29 1.0 21,230
12/31/95 13.29 0.18 2.15 2.33 (0.21) (0.29) 15.12 17.5 28,941
12/31/96 15.12 0.22 1.89 2.11 (0.13) (0.23) 16.87 14.1 45,329
12/31/97 16.87 0.20 (1.49) (1.29) (0.17) (0.99) 14.42 (8.6) 50,054
12/31/98 14.42 0.21 (2.72) (2.51) (0.19) (0.13) 11.59 (17.3) 39,299
Multi-Asset Portfolio
12/31/94 13.88 0.39 (0.60) (0.21) (0.47) (1.49) 11.71 (1.7) 164,159
12/31/95 11.71 0.40 2.47 2.87 (0.49) (1.05) 13.04 24.9 168,243
12/31/96 13.04 0.35 1.36 1.71 (0.49) (0.91) 13.35 13.9 150,619
12/31/97 13.35 0.34 2.36 2.70 (0.43) (2.10) 13.52 21.1 145,685
12/31/98 13.52 0.30 2.56 2.86 (0.40) (2.49) 13.49 24.5 146,712
Strategic Multi-Asset Portfolio
12/31/94 14.06 0.24 (0.53) (0.29) (0.20) (2.28) 11.29 (2.6) 65,357
12/31/95 11.29 0.32 2.18 2.50 (0.23) (1.78) 11.78 22.8 64,026
12/31/96 11.78 0.25 1.41 1.66 (0.40) (0.84) 12.20 14.8 57,744
12/31/97 12.20 0.23 1.48 1.71 (0.31) (2.32) 11.28 14.3 53,289
12/31/98 11.28 0.23 1.13 1.36 (0.26) (1.92) 10.46 15.2 49,254
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME (LOSS) PORTFOLIO
PERIOD TO AVERAGE TO AVERAGE TURNOVER
ENDED NET ASSETS NET ASSETS RATE
<S> <C> <C> <C>
- ----------------------------------------------------------
12/31/94 1.2% 1.0% 73.9%
12/31/95 1.2 1.2 33.0
12/31/96 1.4 1.2 74.3
12/31/97 1.4 0.9 79.9
12/31/98 1.5(1) 0.5 140.0
12/31/94 0.8 0.2 74.8
12/31/95 0.9 0.6 92.1
12/31/96 0.8 0.9 51.7
12/31/97 0.8 0.6 32.2
12/31/98 0.8(1) 0.4 27.1
12/31/94 0.8 (0.1) 64.0
12/31/95 0.8 0.3 60.1
12/31/96 0.8 0.2 69.2
12/31/97 0.7 0.1 60.1
12/31/98 0.7(1) 0.1 59.6
12/31/94 1.0 1.7 36.0
12/31/95 1.0 1.3 32.0
12/31/96 0.9 1.3 52.5
12/31/97 0.9 1.2 27.9
12/31/98 0.9(1) 1.6 51.2
12/31/94 1.1 3.0 82.5
12/31/95 1.1 3.2 85.9
12/31/96 1.1 2.6 64.1
12/31/97 1.1 2.4 56.5
12/31/98 1.1(1) 2.2 51.1
12/31/94 1.3 1.8 63.7
12/31/95 1.3 2.7 36.9
12/31/96 1.4 2.0 51.3
12/31/97 1.4 1.8 59.7
12/31/98 1.5(1) 2.0 157.1
</TABLE>
- ---------------
* Selected data for a share of beneficial interest outstanding throughout each
period (calculated based upon average shares outstanding)
** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company, First SunAmerica Life Insurance Company,
Phoenix Mutual Life Insurance Company and Presidential Life Insurance
Company. If such expenses had been included, total return would have been
lower for each period presented.
(1) The expense ratio reflects the effect of a gross up of custody expense
credits.
- ---------------------
68
<PAGE> 70
- ---------------------
ANCHOR SERIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDERS OF ANCHOR SERIES TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolios, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Money Market Portfolio, Fixed
Income Portfolio, Government & Quality Bond Portfolio, High Yield Portfolio,
Growth and Income Portfolio, Foreign Securities Portfolio, Growth Portfolio,
Capital Appreciation Portfolio, Natural Resources Portfolio, Multi-Asset
Portfolio and Strategic Multi-Asset Portfolio (constituting the 11 portfolios of
Anchor Series Trust, hereafter referred to as the "Trust") at December 31, 1998,
the results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
February 16, 1999
---------------------
69
<PAGE> 71
- ---------------------
ANCHOR SERIES TRUST
SHAREHOLDERS TAX INFORMATION (UNAUDITED)
Certain tax information regarding the Anchor Series Trust is required to be
provided to shareholders based upon each Portfolio's income and distributions
for the taxable year ended December 31, 1998. The information and distributions
reported herein may differ from the information and distributions taxable to the
shareholders for the calendar year ending December 31, 1998. The information
necessary to complete your income tax returns will be included with your Form
1099-DIV which will be sent to you under separate cover in January 1999.
During the year ended December 31, 1998 the Portfolios paid the following
dividends per share along with the percentage of ordinary income dividends that
qualified for the 70% dividends received deductions for corporations:
<TABLE>
<CAPTION>
NET NET NET QUALIFYING % FOR THE
TOTAL INVESTMENT SHORT-TERM LONG-TERM 70% DIVIDENDS
DIVIDENDS INCOME CAPITAL GAINS CAPITAL GAINS RECEIVED DEDUCTION
--------- ---------- ------------- ------------- --------------------
<S> <C> <C> <C> <C> <C>
Money Market Portfolio....................... $ -- $ -- $ -- $ -- --%
Fixed Income Portfolio....................... 1.12 1.12 -- -- --
Government & Quality Bond Portfolio.......... 0.59 0.57 0.02 -- --
High Yield Portfolio......................... 1.16 1.16 -- -- 2.66
Growth and Income Portfolio.................. 0.97 0.17 0.09 0.71 94.27
Foreign Securities Portfolio................. 1.69 0.21 0.64 0.84 --
Growth Portfolio............................. 1.82 0.14 0.05 1.63 100.00
Capital Appreciation Portfolio............... 2.90 0.02 0.19 2.69 30.75
Natural Resources Portfolio.................. 0.32 0.19 -- 0.13 77.15
Multi-Asset Portfolio........................ 2.89 0.40 0.15 2.34 54.95
Strategic Multi-Asset Portfolio.............. 2.18 0.26 0.30 1.62 9.83
</TABLE>
- ---------------------
70
<PAGE> 72
- ---------------------
ANCHOR SERIES TRUST
SHAREHOLDER INFORMATION (UNAUDITED)
SUPPLEMENTAL PROXY INFORMATION: A Special Meeting of the Shareholders of the
Anchor Series Trust Portfolio's was held on December 30, 1998. Each of the
applicable Portfolio voted in favor of adopting the following proposals,
therefore, the results are aggregated for the Portfolio unless otherwise
specified.
1. To elect a slate of four members to the Board of Trustees to hold office
until their successors are duly elected and qualified.
<TABLE>
<CAPTION>
VOTES IN VOTES
FAVOR OF ABSTAINED
----------- ---------
<S> <C> <C>
S. James Coppersmith........................................ 157,102,377 6,574,833
Samuel M. Eisenstat......................................... 157,102,377 6,574,833
Stephen J. Gutman........................................... 157,102,377 6,574,833
Peter A. Harbeck............................................ 157,102,377 6,574,833
</TABLE>
2. To approve a new investment advisory and management agreement between Anchor
Series Trust, on behalf of each Portfolio thereof and SunAmerica Asset
Management Corp. ("SAAMCo"), the terms of which are identical in all
material respects to the existing investment and management agreement.
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
----------- --------- ---------
<S> <C> <C>
152,480,699 4,066,082 7,130,437
</TABLE>
3. To approve a new subadvisory agreement, the terms of which are identical in
all material respects to the existing subadvisory agreement with respect to
each Portfolio between SAAMCo and Wellington Management Company, LLP.
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
----------- --------- ---------
<S> <C> <C>
151,832,125 4,087,376 7,757,693
</TABLE>
4. To approve changing the fundamental investment restriction relating to:
(a) concentration of investments in gold-related industries (Natural
Resources only).
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
----------- --------- ----------
<S> <C> <C>
144,511,238 6,229,582 12,936,371
</TABLE>
(b) the ability to engage in borrowing transactions.
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
----------- ---------- ----------
<S> <C> <C>
143,336,187 10,111,865 10,229,141
</TABLE>
(c) the ability to engage in lending transactions.
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
----------- --------- ----------
<S> <C> <C>
144,011,568 9,650,861 10,014,766
</TABLE>
5. To ratify the selection of independent accountants.
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
----------- --------- ---------
<S> <C> <C>
152,872,781 4,013,918 6,790,491
</TABLE>
---------------------
71
<PAGE> 73
- ---------------------
COMPARISONS: PORTFOLIOS VS. STOCKS
Wellington Management Company, LLP is pleased to provide the
following investment comments regarding the eleven Anchor Series
Trust Portfolios for the fiscal year ended December 31, 1998. The
accompanying graphs compare the performance of a $10,000
investment in each portfolio (except Money Market) to a $10,000
investment in a comparable securities index over the ten year
period ended December 31, 1998. Importantly, such indices
represent "paper" portfolios and do not reflect the costs and
expenses of actual investing. To provide investors with additional
perspective we have added comparative fund averages as compiled by
Lipper Analytical Services. The Lipper averages referred to in the
following pages represent all variable annuity underlying funds
with similar objectives and are included in each portfolio's
discussion when a comparable Lipper category exists. The Lipper
returns shown include all fund expenses but exclude insurance
company expenses associated with the variable annuities. We
believe these averages may be helpful to shareholders in
evaluating the Anchor Series Trust Portfolios, since an average of
comparable funds is often a truer comparison than an unmanaged
index of securities such as the S&P 500 or the Lehman Aggregate
(which are not actively managed and are reported "gross" of all
expenses and transaction costs).
THE FOLLOWING GRAPHS AND TABLES SHOW THE PERFORMANCE OF THE
PORTFOLIOS AT THE ANCHOR SERIES TRUST LEVEL AND INCLUDE ALL TRUST
EXPENSES, BUT NO INSURANCE COMPANY EXPENSES ASSOCIATED WITH THE
VARIABLE ANNUITY AND NO CONTINGENT DEFERRED SALES CHARGE. NO
EXPENSES ARE DEDUCTED FROM THE PERFORMANCE OF THE INDEXES. ALL
DIVIDENDS ARE ASSUMED TO BE REINVESTED.
Investments in stocks and bonds are subject to risk, including
stock market and interest-rate fluctuations. Investments in
non-U.S. stocks are subject to additional risks, including
political and social instability, differing securities regulations
and accounting standards, and limited public information.
High-yield bonds tend to be subject to greater price swings than
higher-rated bonds and, of course, payment of interest and
principal is not assured. Mortgage-backed securities are subject
to prepayment, which can result in reinvestment of principal at
lower yields. Money market instruments generally offer stability
and income, but an investment in these securities, like
investments in other portfolios, is not guaranteed by the U.S.
government or any other entity. There can be no assurance that the
Money Market Portfolio will be able to maintain a stable net asset
value of $1.00 per share.
- ---------------------
Money Market Portfolio
The Money Market Portfolio returned 5.04% in 1998 exactly matching
the return for the IBC All-Taxable Index and out-performing the
index adjusted for expenses. The portfolio slightly
under-performed against the Lipper Variable Annuity Money Market
Average which returned 5.10% for the year. Although the global
crisis during the summer months caused liquidity problems in the
market, the portfolio's focus on current income consistent with
stability of principal has helped achieve a solid return. $1.00
NAV was maintained at all times throughout the year.
- ---------------------
72
<PAGE> 74
FIXED-INCOME PORTFOLIOS
FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
LIPPER VA-UF CORP. DEBT LEHMAN BROTHERS
FIXED INCOME PORTFOLIO A RATED AVERAGE GOV'T/CORP. INDEX
---------------------- ----------------------- -----------------
<S> <C> <C> <C>
10000 10000 10000
12/89 11288 11251 11423
12/90 12150 12134 12370
12/91 14001 14168 14365
12/92 14911 15226 15454
12/93 16097 16907 17159
12/94 15577 16207 16557
12/95 18565 19306 19743
12/96 19013 19787 20316
12/97 20806 21643 22299
12/98 22472 23389 24411
</TABLE>
- --------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- --------------------------------------------------------------------------------
1-year 8.01%
5-year 6.90%
10-year 8.43%
- --------------------------------------------------------------------------------
The Lehman Brothers Government/Corporate Index includes Treasury and agency
securities, as well as corporate bonds and Yankee (U.S.-dollar denominated, non
U.S. issuer) issues. The Lipper Variable Annuity Corporate Debt category
includes funds which invest at least 65% of assets in corporate and government
debt issues rated in the top four credit rating categories.
THE FIXED INCOME PORTFOLIO, which invests in corporate bonds,
mortgage-backed and asset-backed securities, Treasury and agency
bonds and up to 20% in high yield bonds, returned 8.0% in 1998.
The portfolio was in line with the Lipper VA-UF Corp. Debt A-Rated
Average return of 8.1% in 1998. The Lehman Brothers Aggregate
Index returned 8.7% while the Lehman Brothers Gov't/Corp. Index
returned 9.5%. This underperformance was due to an underweighting
in Treasuries, heavily weighted in the Lehman Brothers Gov't/Corp.
Index at 56% and the best performing sector of the fixed income
market in 1998.
The graph represents past performance, which is not indicative of
future results.
---------------------
73
<PAGE> 75
FIXED-INCOME PORTFOLIOS (CONTINUED)
GOVERNMENT AND QUALITY BOND PORTFOLIO
- --------------------------------------------------------------------------------
GOVERNMENT AND QUALITY BOND PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- --------------------------------------------------------------------------------
1-year 9.18%
5-year 7.33%
10-year 9.19%
- --------------------------------------------------------------------------------
The Lehman Brothers Aggregate Index combines several Lehman Brothers indexes
which include the government and corporate markets, agency mortgage
pass-through securities, and asset-backed securities. The Lipper Variable
Annuity General U.S. Government category includes funds which invest at least
65% of assets in U.S. government and agency issues.
<TABLE>
<CAPTION>
Government and Lipper VA-UF U.S.
Quality Bond Lehman Brothers Govt. Funds
Portfolio Aggregate Index Average
<S> <C> <C> <C>
10000 10000 10000
Dec-89 11562 11453 11308
Dec-90 12462 12477 12218
Dec-91 14617 14474 14141
Dec-92 15626 15545 15113
Dec-93 16918 17061 16571
Dec-94 16398 16563 15910
Dec-95 19582 19623 18612
Dec-96 20149 20336 19099
Dec-97 22070 22299 20774
Dec-98 24095 24237 22465
</TABLE>
THE GOVERNMENT AND QUALITY BOND PORTFOLIO returned 9.2% in 1998,
ahead of the Lipper VA-UF U.S. Govt. Funds Average return of 8.1%
and the Lehman Aggregate return of 8.7%. The portfolio's sector
emphasis on Treasuries was additive during the year. Also helpful
to returns was the portfolio's duration management during the
year, and a credit focus on very high quality corporate bonds.
The graph represents past performance, which is not indicative of
future results.
- ---------------------
74
<PAGE> 76
FIXED-INCOME PORTFOLIOS (CONTINUED)
HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- --------------------------------------------------------------------------------
1-year -4.48%
5-year 6.16%
10-year 7.75%
- --------------------------------------------------------------------------------
The Lehman Brothers High Yield Index covers the universe of fixed rate, publicly
issued, noninvestment grade debt registered with the SEC. All bonds included in
the index must be U.S. dollar-denominated and non-convertible. The Lipper
Variable Annuity High Current Yield category includes funds which aim at high
(relative) current yield from fixed income securities. There are no quality or
maturity restrictions, though these funds tend to invest in lower grade debt
issues.
<TABLE>
<CAPTION>
Lipper VA-UF
High Yield Lehman Brothers High Current Yield
Portfolio High Yield Index Average
<S> <C> <C> <C>
10000 10000 10000
Dec-89 9716 10083 10186
Dec-90 8672 9116 9577
Dec-91 11538 13327 12894
Dec-92 13144 15426 14969
Dec-93 15651 18065 17740
Dec-94 14950 17885 17199
Dec-95 17758 21314 20322
Dec-96 19836 23732 23090
Dec-97 22093 26763 26177
Dec-98 21102 27263 26203
</TABLE>
THE HIGH YIELD PORTFOLIO declined by 4.5% in 1998, lagging both
the Lehman Brothers High Yield Index return of 1.9% and the Lipper
VA-UF High Current Yield Average return of 0.1%. The primary cause
of this shortfall in performance was the portfolio's position in
non-U.S. high yield bonds. While the fund has a relatively low
weight in non-U.S. bonds (13% as of 12/31/98), they were by far
the worst performing sector during the year. In addition, cash
flow was a factor as the fund experienced heavy shareholder
redemption and subscription activity throughout the late summer
and fall, a period when high yield spreads were at their widest,
making transaction costs expensive.
The graph represents past performance, which is not indicative of
future results.
---------------------
75
<PAGE> 77
BALANCED PORTFOLIOS
MULTI-ASSET PORTFOLIO
<TABLE>
<CAPTION>
LIPPER VA-UF CUSTOM INDEX
MULTI-ASSET S&P 500 LEHMAN BROTHERS FLEXIBLE FUNDS ------------
PORTFOLIO COMPOSITE INDEX AGGREGATE INDEX AVERAGE
----------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
10000 10000 10000 10000 10000
12/89 11969 13168 11453 12092 12443
12/90 12163 12759 12477 12220 12664
12/91 15481 16647 14474 15331 15728
12/92 16753 17915 15545 16489 16892
12/93 17978 19721 17061 18511 18521
12/94 17675 19981 16563 18161 18525
12/95 22083 27490 19623 22574 23883
12/96 25146 33802 20336 25718 27480
12/97 30457 45079 22299 30566 33905
12/98 37909 57961 24237 34693 40947
</TABLE>
- -------------------------------------------------------------------------------
MULTI-ASSET PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- -------------------------------------------------------------------------------
1-year 24.47%
5-year 16.09%
10-year 14.25%
- -------------------------------------------------------------------------------
The S&P 500 Composite Index tracks the performance of 500 large company stocks
which are designed to represent price movements in the U.S. equity market.
Companies are chosen for market size and liquidity so that, in aggregate, they
represent a broad distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it is market
weighted, the index will reflect changes in larger companies more heavily than
those in smaller companies. The Lehman Brothers Aggregate Index combines
several Lehman Brothers indexes which include the government and corporate
markets, agency mortgage pass-through securities, and asset-backed securities.
The Lipper VA Flexible category includes funds which allocate their
investments across various asset classes, including domestic common stocks,
bonds, and money market instruments, with a focus on total return. Custom index
consists of 60% S&P 500 Composite Index, 35% Lehman Brothers Aggregate Index,
and 5% 3-month T-bill.
THE MULTI-ASSET PORTFOLIO returned 24.5% in 1998, well ahead of
similar funds as measured by the Lipper Variable Annuity-UF
Flexible Funds Average return of 13.5%. This return was closer to
the 28.6% return of the S&P 500 Composite Index than it was to the
8.7% return of the Lehman Aggregate in 1998. The Custom Index,
which is comprised of 60% of S&P 500, 35% of Lehman Brothers
Aggregate, and 5% of 3-month T-bill, returned 20.8%. Aiding the
portfolio's returns in 1998 were well timed asset allocation
decisions, excellent U.S. stock selection and performance as well
as the fact that the bond component outperformed the bond market
as a whole. In short, all components were additive in 1998.
The graph represents past performance, which is not indicative of
future results.
- ---------------------
76
<PAGE> 78
BALANCED PORTFOLIOS (CONTINUED)
STRATEGIC MULTI-ASSET PORTFOLIO
<TABLE>
<CAPTION>
STRATEGIC MSCI AC S&P 500 SALOMON
MULTI-ASSET WORLD FREE COMPOSITE LIPPER VA-UF BROTHERS
PORTFOLIO USD INDEX INDEX GLOBAL WORLD GOV'T
----------- ---------- --------- FLEXIBLE BOND U.S.$
AVERAGE HEDGED INDEX
------------ ------------
<S> <C> <C> <C> <C> <C>
10000 10000 10000 10000 10000
12/89 11979 11765 13168 11561 10886
12/90 11072 9826 12759 11238 11529
12/91 13751 11782 16647 13747 13049
12/92 14292 11284 17915 14605 14078
12/93 16479 14091 19721 17400 15825
12/94 16053 14800 19981 16977 15234
12/95 19709 17680 27490 20653 17985
12/96 22628 20013 33802 23829 19548
12/97 25869 23014 45079 26539 21619
12/98 29803 28070 57961 29344 24004
<CAPTION>
CUSTOM INDEX
------------
<S> <C>
10000
12/89 11863
12/90 11022
12/91 13408
12/92 13747
12/93 16146
12/94 16484
12/95 19945
12/96 22279
12/97 25630
12/98 29513
</TABLE>
- -------------------------------------------------------------------------------
STRATEGIC MULTI-ASSET PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- -------------------------------------------------------------------------------
1-year 15.21%
5-year 12.58%
10-year 11.54%
- -------------------------------------------------------------------------------
The S&P 500 Composite Index tracks the performance of 500 large company stocks
which are designed to represent price movements in the U.S. equity market.
Companies are chosen for market size and liquidity so that, in aggregate, they
represent a broad distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it is market
weighted, the index will reflect changes in larger companies more heavily than
those in smaller companies. The Lipper Variable Annuity-UF Global Flexible
Average includes funds which allocate their investments across various asset
classes, including both domestic and foreign stocks, bonds and money market
instruments, with a focus on total return. At least 25% of its portfolio is
invested in securities traded outside of the U.S., including shares of gold
mines, gold-oriented mining finance houses, gold coins, or bullion. Custom
Index consists of 65% MSCI AC World Free, 20% Salomon Brothers World Gov't Bond
(U.S.$ Hedged), 10% Lehman Brothers High Yield Index, and 5% 3-month T-bill.
Custom Index prior to 2/28/98 consisted of 30% MSCI AC World Free Ex-U.S., 20%
Lehman Brothers Aggregate, 30% S&P 500 Composite Index and 10% Russell 2000
Index, and 10% 3-month T-bill.
STRATEGIC MULTI-ASSET
This year we are substituting the MSCI AC World Free USD and
Salomon Brothers World Government Bond Hedged indexes for the S&P
500 in these benchmark comparisons because we believe that the
MSCI AC World Free USD and Salomon Brothers World Government Bond
Hedged indexes are more comparable to the portfolio than the S&P
500.
THE STRATEGIC MULTI-ASSET PORTFOLIO returned 15.2% in 1998, well
ahead of similar funds as measured by the Lipper Variable
Annuity-UF Global Flexible Average, which returned 10.6%. The
Strategic Multi-Asset Portfolio is a global asset allocation fund
which invests broadly across the world's major stock markets
(including large cap and small cap investments) and the world's
major bond markets (both investment grade and high yield). This
year we have provided a custom index which is a combination of the
following: 65% MSCI AC World Free USD, 20% Salomon Brothers World
Gov't Bond (U.S.$ Hedged), 10% Lehman Brothers High Yield and 5%
3-month T-bill. This custom benchmark's return in 1998 was 15.2%.
Some of the component pieces returns were as follows:
Salomon Brothers World Government Bond Index (U.S.$ Hedged)
11.0%
Lehman Brothers High Yield Index 1.9%
MSCI All Country World Free USD Index 22.0%
Additive to returns in 1998 was excellent stock selection in the
U.S. equities -- especially large cap equities. Other asset
classes represented in the portfolio provided representative
returns while asset allocation was a slight negative.
The graph represents past performance, which is not indicative of
future results.
---------------------
77
<PAGE> 79
EQUITY PORTFOLIOS
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
THE GROWTH AND INCOME PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- --------------------------------------------------------------------------------
1-year 30.16%
5-year 16.23%
10-year 15.83%
- --------------------------------------------------------------------------------
The S&P 500 Composite Index tracks the performance of 500 large company stocks
which are designed to represent price movements in the U.S. equity market.
Companies are chosen for market size and liquidity so that, in aggregate, they
represent a broad distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it is market
weighted, the index will reflect changes in larger companies more heavily than
those in smaller companies. The Lipper Variable Annuity Growth and Income
category includes funds which combine a growth of earnings orientation and an
income requirement for level and/or rising dividends.
<TABLE>
<CAPTION>
Lipper VA-UF
Growth and S&P 500 Growth & Income
Income Portfolio Composite Index Average
<S> <C> <C> <C>
10000 10000 10000
Dec-89 11471 13168 12411
Dec-90 11030 12759 12026
Dec-91 13986 16647 15438
Dec-92 16797 17915 16749
Dec-93 20496 19721 18824
Dec-94 18514 19981 18747
Dec-95 21586 27490 24765
Dec-96 25936 33802 29893
Dec-97 33395 45079 38096
Dec-98 43469 57961 44332
</TABLE>
THE GROWTH AND INCOME PORTFOLIO returned 30.2% in 1998, ahead of
the S&P 500 index return of 28.6% and the Lipper VA-UF Growth and
Income Average return of 16.4%. Since the portfolio was
repositioned from convertible securities in 1996 to be focused on
dividend paying stocks, investors have been well rewarded with a
26.1% annualized return (2/28/96 to 12/31/98). The fund's focus on
large cap, stable growth stocks was beneficial in 1998. In
particular, technology stocks, healthcare and select retail
holdings benefited the portfolio's performance.
The graph represents past performance, which is not indicative of
future results.
- ---------------------
78
<PAGE> 80
EQUITY PORTFOLIOS (CONTINUED)
FOREIGN SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
FOREIGN SECURITIES PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- --------------------------------------------------------------------------------
1-year 10.71%
5-year 5.88%
10-year 5.40%
- --------------------------------------------------------------------------------
The MSCI All Country Free (ex-U.S.) Index includes performance of 2,124
securities listed in 45 countries, which includes the countries contained in
the MSCI EAFE index, as well as North American countries (excluding the U.S.)
and other emerging markets worldwide. The index covers approximately the top
60% of market capitalization for each of the countries included within the
index. The Lipper Variable Annuity International Average includes funds which
invest assets in securities whose primary trading markets are outside of the
U.S.
<TABLE>
<CAPTION>
MSCI All Country Lipper VA-UF
Foreign Securities Free (ex-U.S.) International
Portfolio Index Average
<S> <C> <C> <C>
10000 10000 10000
Dec-89 12908 11203 12848
Dec-90 11263 8656 11571
Dec-91 11234 9864 12928
Dec-92 9763 8782 12102
Dec-93 12713 11847 16080
Dec-94 12302 12633 16122
Dec-95 13851 13888 18106
Dec-96 15437 14816 20754
Dec-97 15278 15118 21824
Dec-98 16914 17304 24718
</TABLE>
THE FOREIGN SECURITIES PORTFOLIO returned 10.7% in 1998, behind
the 14.5% return of the MSCI All Country World Free (ex-U.S.)
Index and the 13.3% return for the Lipper Variable Annuity-UF
International Average return. While regional and country
allocation in the portfolio was generally positive, stock
selection hurt returns. In particular, a rotation out of
industrial stocks and a reduction in financial and more
economically sensitive securities during the summer was poorly
timed as those issues bounced back later in the year, out
performing the more defensive (utility and healthcare) sectors
where the portfolio's assets were focused.
The graph represents past performance, which is not indicative of
future results.
---------------------
79
<PAGE> 81
EQUITY PORTFOLIOS (CONTINUED)
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
S&P 500 COMPOSITE LIPPER VA-UF
GROWTH PORTFOLIO INDEX GROWTH AVERAGE CUSTOM INDEX
---------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
10000 10000 10000
12/89 13009 13168 12942
12/90 12804 12759 12343
12/91 18030 16647 16901
12/92 19009 17915 18302
12/93 20483 19721 20520
12/94 19516 19981 20387
12/95 24653 27490 27113 24648
12/96 30828 33802 32662 30219
12/97 40201 45079 41138 39654
12/98 51845 57961 51398 50028
</TABLE>
- -------------------------------------------------------------------------------
THE GROWTH PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- -------------------------------------------------------------------------------
1-year 28.96%
5-year 20.41%
10-year 17.89%
- -------------------------------------------------------------------------------
The S&P 500 Composite Index tracks the performance of 500 large company stocks
which are designed to represent price movements in the U.S. equity market.
Companies are chosen for market size and liquidity so that, in aggregate, they
represent a broad distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it is market
weighted, the index will reflect changes in larger companies more heavily than
those in smaller companies. The Lipper Variable Annuity Growth category
includes funds which normally invest in companies whose long term earnings are
expected to grow significantly faster than the earnings of the stocks
represented in the major unmanaged stock indices. Custom Index consists of 50%
Russell 3000 Index and 50% Morningstar Growth Fund Index. We created this
custom benchmark in 8/95.
THE GROWTH PORTFOLIO returned 29.0%, outperforming the Lipper
Variable Annuity-UF Growth Average return of 24.9% and the S&P 500
index return of 28.6%. The portfolio's investments in technology
stocks, such as America OnLine, Cisco and Texas Instruments, were
major positive factors in the portfolio's out performance during
1998. Healthcare and retail investments were also additive. The
portfolio focuses on high quality companies broadly across sectors
and market cap ranges and, therefore, generally has the risk
profile of broad market averages such as the Russell 3000. We have
shown a representative custom index this year, which combines the
Russell 3000 stocks together with the stocks held by the 30
largest growth mutual funds as compiled by Morningstar. We believe
this custom index (which returned 26.2% in 1998) is more
representative of the investment universe for this portfolio.
The graph represents past performance, which is not indicative of
future results.
- ---------------------
80
<PAGE> 82
EQUITY PORTFOLIOS (CONTINUED)
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
RUSSELL 2000 LIPPER VA-UF CUSTOM INDEX S&P 500
CAPITAL INDEX CAPITAL ------------ COMPOSITE INDEX
APPRECIATION ------------ APPRECIATION ---------------
PORTFOLIO AVERAGE
------------ ------------
<S> <C> <C> <C> <C> <C>
10000 10000 10000 10000 10000
12/89 12502 11624 12828 12272 13168
12/90 10480 9357 12048 10747 12759
12/91 16362 13665 17496 14578 16647
12/92 20607 16181 19263 16122 17915
12/93 24949 19240 22278 18783 19721
12/94 24000 18890 21902 18871 19981
12/95 32296 24262 29131 24644 27490
12/96 40414 28264 33885 29213 33802
12/97 50691 34584 41276 36593 45079
12/98 61946 33703 50447 41148 57961
</TABLE>
- -------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- -------------------------------------------------------------------------------
1-year 22.20%
5-year 19.95%
10-year 20.01%
- -------------------------------------------------------------------------------
The S&P 500 Composite Index tracks the performance of 500 large company stocks
which are designed to represent price movements in the U.S. equity market.
Companies are chosen for market size and liquidity so that, in aggregate, they
represent a broad distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it is market
weighted, the index will reflect changes in larger companies more heavily than
those in smaller companies. The Lipper Variable Annuity Capital Appreciation
category includes funds which aim at maximum capital appreciation. Custom Index
consists of 45% S&P 500 Composite Index, 45% Russell 2000 Index, and 10% MSCI
AC World Free ex-U.S. Index.
CAPITAL APPRECIATION
This year we are substituting the Russell 2000 Index for the S&P
500 Composite Index in benchmark comparisons as we believe the
Russell 2000 better represents the portfolio's composition.
THE CAPITAL APPRECIATION PORTFOLIO returned 22.2% in 1998, well
ahead of the Russell 2000 Index return of -2.6% and identical to
the Lipper VA-UF Capital Appreciation Average return of 22.2%.
This year we have also added a custom benchmark composed of 45%
S&P 500, 45% Russell 2000, and 10% MSCI AC World Free ex-U.S., to
more accurately reflect the more diversified exposure that is
typical of the eclectic, bottom-up approach which the Portfolio
Manager, Robert Rands, employs in the management of this
portfolio. This custom index returned 12.5% in 1998. Major
contributors to the portfolio's returns in 1998 by sector were
technology, healthcare and select retailers like Abercrombie and
Fitch.
The graph represents past performance, which is not indicative of
future results.
---------------------
81
<PAGE> 83
EQUITY PORTFOLIOS (CONTINUED)
NATURAL RESOURCES PORTFOLIO
- --------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
- --------------------------------------------------------------------------------
1-year -17.33%
5-year 0.46%
10-year 4.18%
- --------------------------------------------------------------------------------
The S&P 500 Composite Index tracks the performance of 500 large company stocks
which are designed to represent price movements in the U.S. equity market.
Companies are chosen for market size and liquidity so that, in aggregate, they
represent a broad distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it is market
weighted, the index will reflect changes in larger companies more heavily than
those in smaller companies. The Lipper Variable Annuity Natural Resources
category includes funds which invest more than 65% of its equity commitment in
natural resource stocks. The MSCI Non-Ferrous Metals, Gold Mines, and Energy
Sources indices represent specific commodities underlying the Natural Resources
Portfolio.
<TABLE>
<CAPTION>
LIPPER VA-UF MSCI ENERGY MSCI GOLD
NATURAL S&P 500 NATURAL SOURCES INDEX MINES INDEX
RESOURCES COMPOSITE RESOURCES ------------- -----------
PORTFOLIO INDEX AVERAGE
--------- --------- ------------
<S> <C> <C> <C> <C> <C>
10000 10000 10000
12/89 11832 13168 12458
12/90 10055 12759 10887
12/91 10544 16647 11131
12/92 10810 17915 10988
12/93 14718 19721 15000 14752 14752
12/94 14866 19981 14597 16106 13406
12/95 17461 27490 16429 19943 14377
12/96 19926 33802 20010 24739 14115
12/97 18214 45079 18347 28979 8616
12/98 15057 57961 14559 31047 7888
<CAPTION>
MSCI NON-
FERROUS METALS
INDEX
--------------
<S> <C>
12/89
12/90
12/91
12/92
12/93 14752
12/94 16923
12/95 19036
12/96 20110
12/97 14935
12/98 13203
</TABLE>
THE NATURAL RESOURCES PORTFOLIO declined 17.3% for the year. This
was less than the decline experienced by similar funds as measured
by the Lipper Variable Annuity-UF Natural Resources Average
decline of 20.7%. Oil, gas, metals, minerals, gold and paper
stocks were the worst performing areas of the broad market in 1998
(with the S&P 500 up 28.6%). Listed below are the annual returns
for each of the major sectors represented in this portfolio:
MSCI Material and Commodities -16.3%
MSCI Forest Product and Paper 2.7%
MSCI Steels -5.7%
MSCI Non-Ferrous Metals -11.6%
MSCI Gold Mines -8.4%
MSCI Energy Equipment/Services -46.0%
MSCI Energy Sources 7.1%
This portfolio had a mandatory minimum requirement of 25% in gold
stocks. This fundamental restriction was removed effective 1/4/99.
It is management's expectation that the gold weighting will
decline to the low teens but still be a significant sector weight
in the portfolio. Aiding returns during a very challenging market
environment for natural resource stocks was the portfolio's
selective investment in REITs. Paper stocks also did relatively
better than other commodity-related securities in 1998.
The graph represents past performance, which is not indicative of
future results.
- ---------------------
82
<PAGE> 84
------------
[LOGO] SUNAMERICA BULK RATE
1 SunAmerica Center U.S. POSTAGE
Los Angeles, California 90067-6022 PAID
TOWNE, INC.
------------
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE PURCHASERS UNLESS
ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS.
A-1112-AR (2/99)
